Tuesday'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 Tuesday:

Company

Closing Price

CAPS Rating

(5 max)

 

Change

52-Week

Range

Colonial BancGroup (NYSE: CNB  )

$4.23

*

(11.69%)

$4.12-$25.50

Harris & Harris (Nasdaq: TINY  )

$6.73

****

(11.21%)

$5.76-$11.79

M/I Homes (NYSE: MHO  )

$17.25

*

(11.04%)

$7.20-$29.74

Downey Financial (NYSE: DSL  )

$4.43

*

(9.22%)

$4.41-$70.79

Washington Mutual (NYSE: WM  )

$6.22

*

(7.85%)

$5.75-$44.04

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

Naughty?
Well, OK, we can't exactly call these stocks naughty. There are days when five-star winners and newsletter recommendations appear on this list. Today, sadly, is one of those days.

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 110,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should, too.

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

Worse
We begin with -- and I hate saying this -- nanotech investor and Rule Breakers recommendation Harris & Harris.

My reasoning is simple: Management says that, as of June 16, the company's net asset value (NAV) per share was $5.77. The stock traded for a 17% premium to that as of yesterday's close; and that's after an 11% haircut.

Much as I -- and insiders -- love Harris & Harris over the long term, I can't see investors conferring much of a premium over NAV before the fund achieves a massive liquidating event for one of its nanotech prospects. That's likely to take years.

Worser
Next up is Washington Mutual, a somewhat frequent guest in this column, which is suffering because fewer consumers are seeking loans.

Applications were down 9% last week, according to the Mortgage Bankers Association. Refinancings -- a staple of the banking business before the credit crunch -- were down 15%, and interest rates are at their highest since last July, according to an Associated Press report.

But this data affects hundreds of banks, right? Why single out WaMu? Two reasons:

  1. It's the third-largest mortgage originator in the U.S.
  2. The bank has twice cut its dividend, which means there's nothing left to prop up the shares when bad news like this hits the wires.

Ugh.

Worst
But our winner is Colonial BancGroup, which switched from a national to a state bank charter for Alabama. Colonial, which has been hurt by the housing meltdown in nearby Florida, says the move is aimed at helping customers.

Perhaps that's true, but I'm more concerned about Texas. Colonial's Texas Ratio is rising like Mississippi floodwaters during rainy season. Behold:

Metrics (in mil)

TTM*

2007

2006

2005

90-day past due loans

$70.6

$23.8

$8.1

$10.3

Nonperforming loans

$246.5

$121.9

$23.3

$25.8

Tangible book value

$1,107.5

$1,202.0

$1,383.0

$1,237.7

Allowance for loan losses

$240.8

$238.8

$174.9

$171.1

Texas Ratio

23.5%

10.1%

2.0%

2.6%

Source: Capital IQ, a division of Standard & Poor's.
*TTM = trailing 12 months ended on March 31, 2008.

Color me jaded but I doubt that Colonial will dump enough underperforming assets to reverse this trend soon, if at all.

Colonial BancGroup and its we-messed-with-Texas-and-got-the-horns loan portfolio ... Tuesday'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.

Fool.com contributor Tim Beyers, who is ranked 19,135 out of more than 110,000 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.

Harris & Harris is a Rule Breakers recommendation. Try this market-beating service risk-free for 30 days.

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 that cooked spinach is the worst veggie in the world.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 18, 2008, at 6:31 PM, bisondan wrote:

    After 3 years due diligance I still believe TINY and ARWR offer the best way to be involved in nanotech in the future. I have looked at several "nanotech companies" going as far as traveling to see the companies headquarters and talking to the owners in person. I may not be smart enough to pick a single winner but believe the business model of these two companies will prove very profitable in the future. These companies are long term investments, not short term trading stocks. JMHO.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 667569, ~/Articles/ArticleHandler.aspx, 10/20/2014 4:20:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement