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Monday's Worst Stocks in the World

Bad days. We all have them; some of us deserve them. Here are five stocks whose naughty ways drew investors' scorn on Monday:


Closing Price

CAPS Rating (5 Max)

% Change

52-Week Range

Rimage (Nasdaq: RIMG  )





Pier 1 Imports (NYSE: PIR  )





Washington Mutual (NYSE: WM  )





Lehman Brothers (NYSE: LEH  )





Select Comfort (Nasdaq: SCSS  )





Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

Well, OK, we can't exactly call these stocks naughty. There are days when five-star winners and newsletter recommendations appear here. Today isn't one of those days.

But if you're an investor, you'll have plenty of bad days. The trick is to avoid dating -- or, worse, marrying -- your losers. That's why I listen when our 105,000-person-strong (and growing) Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should listen, too.

Thus, here is today's list of the worst stocks in the world.

We begin with Lehman Brothers, which on Monday told investors to expect a massive $2.8 billion quarterly loss. Executives plan to raise $6 billion in fresh capital to stabilize the business.

Lehman? Say hello to Citigroup (NYSE: C  ) . And Washington Mutual. And Wachovia (NYSE: WB  ) . And ... oh, you get the picture.

Lehman gets special mention here not because of its capital quest but because there's simply no telling whether $6 billion will be enough. As Foolish colleague Matt Koppenheffer put it just last Friday: "My take is that the opacity of Lehman makes it extraordinarily tough to figure out whether this stock is a victim of irrational fear or a ticking time bomb. So I'm not shorting it and I'm not buying it -- instead, I'm keeping my distance and getting ready to duck and cover should it end up blowing."

Good advice.

Next up is Rimage, which dramatically reduced its second-quarter earnings guidance. Color me unsurprised; I don't see the CD and DVD duplication business being all that important in the iTunes era.

Neither does CAPS investor bigmommo, who lucidly described the problem in a pitch posted last month:

This company though financially solid, has an incredibly uncertain future. The whole playing field is changing dramatically. ... I believe on-demand will completely replace physical media distribution in the next 5-10 years. Bandwidth problems will be solved. This shifts the physical storage to centralized servers. Sure, there is business there, but at what growth rate? [Emphasis added.]


But our winner is Pier 1 Imports, which yesterday offered to acquire Cost Plus for $88.4 million, or $4 per a share.

The deal would give Cost Plus investors a 31% premium to Friday's close. Pier 1's investors aren't so lucky; they'd get a business that hasn't produced a dime of free cash flow since 2004 and whose returns on invested capital are on a ski-slope-shaped decline.

But you knew that, right? CAPS investor TheStillMan did. From his January 2007 pitch: "Management opens more and more stores, and becomes less and less profitable. Not exactly a recipe for success, is it?"

Nope. Makes me, and a few thousand other investors who sold off Pier 1 yesterday, wonder how this deal could make sense. The math certainly doesn't. Pier 1 and Cost Plus, which together have just $96 million in cash and investments, burned through -- wait for it -- $118 million in moola over the trailing 12 months.

These are two bad businesses in dire need of further capital to stay afloat. 

Pier 1 and Cost Plus ... combining to create Monday's Worst Stock in the CAPS world.

Do you agree? Disagree? Let us know what you think by signing up for CAPS today. It's 100% free to participate.

I'll be back tomorrow with more stock horror stories. contributor Tim Beyers, who is ranked 18,583 out of more than 105,000 participants in CAPS, also writes for Rule Breakers. He hopes that Keith Olbermann doesn't mind the blatant theft of his "Worst Person in the World" segment from Countdown. Remember, Keith, imitation is the sincerest form of flattery.

Tim didn't own shares of any of the stocks mentioned in this article at the time of publication. The Motley Fool's disclosure policy thinks cooked spinach is the worst veggie in the world.

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9/17/2008 3:28 PM
LEH $0.13 Down +0.00 +0.00%
Lehman Brothers Ho… CAPS Rating: *
PIR $4.52 Down -0.02 -0.44%
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