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And the World's Scariest Stock Is ...

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The scariness of the markets hasn't disappeared with the passing of Halloween. After a breather and a small rally leading up to the election of President-elect Obama, markets resumed their gloomy ways with a two-day drop of 10%. Last week’s report of a 14-year high in the unemployment rate is unlikely to help, either.

On Halloween, we asked you, our Foolish readers, to go to CAPS and vote for the World's Scariest Stock by ranking them as "underperform." We had some pretty scary contenders, too.

The also-rans
Citigroup (NYSE: C  ) , for instance. This was called a bank without a niche, in an era when anything related to the financial sector was the stock equivalent of Freddy Krueger. Did you vote it the World's Scariest? Nope. In fact, more of you called off your underperform ratings than made new ones.

You did vote for Sears Holdings, which clinched third place in our scariest stock contest. The buybacks at Sears don’t seem to be working for shareholders, much less helping any sort of turnaround. Then there was Yahoo! (Nasdaq: YHOO  ) , a company struggling to stay relevant in Internet search and advertising in the face of Google's (Nasdaq: GOOG  ) dominance. A nearly uninterrupted string of falling year-over-year income figures since the first quarter of 2006, and a stock price that had fallen nearly 60% over the previous year, helped win your votes to rank this the second-scariest stock. Given last week's news that Microsoft's (Nasdaq: MSFT  ) CEO has no interest in making a new buyout offer, Yahoo! should be trying to maintain its own second-place status in the competitive web arena.

The envelope, please
This year's winner of the title of World's Scariest Stock is a retailer. It sells a relatively expensive product, and despite a loyal customer base, it's been closing stores recently. This company's also facing stiff competition from the likes of McDonald's (NYSE: MCD  ) and Tim Hortons (NYSE: THI  ) for its main product. It's even cut back on the number of products offered, in an attempt to get back to basics. And last quarter, Foolish readers, it reported its first quarterly loss as a public company.

As CAPS member amicidelbosco eloquently put it in making an underperform call last weekend:

This whale can only see further depths. Even Captain Ahab will find difficulty navigating this one. It's woes have been festering before our present global financial crisis. Meaning that weakness is more acute than the Mermaid can see.

Ladies and gentlemen, I present to you the winner (or loser, depending on how you look at it) of the Fool's 2008 World's Scariest Stock Award: Starbucks (Nasdaq: SBUX  ) !

Starbucks is a recommendation of both Stock Advisor and Inside Value, and The Fool owns some shares. Google was chosen by Rule Breakers, Tim Horton's by Global Gains, and Microsoft by Inside Value. Try any one of those newsletter services free for 30 days.

Fool editor Jim Mueller owns shares of Starbucks and is a beneficial owner of Microsoft, but he had no position in any other company mentioned at the time of publication. The Fool is investors writing for investors.

Read/Post Comments (10) | Recommend This Article (24)

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 November 10, 2008, at 11:57 AM, Dadw5boys wrote:

    C is going to be a real force once this is over wait and see. Thier investments that no one is tracking hold great values in so many countries. Along with the banking and invesmtent arms what more of a Niche would they need ? A massage palor ?

  • Report this Comment On November 10, 2008, at 2:27 PM, scott0807 wrote:

    i love, really love, the fact that i can buy a share of sbux for what 2 venti cappawhatevers cost. WOW! :) scott (love the coffee, hate my shares of sbux)

  • Report this Comment On November 10, 2008, at 2:51 PM, RHaganC wrote:

    I still seem them sticking it through and coming out of the turmoil though - to play off scott0807, I will wait until the stock is about where a large regular coffee costs to buy! ;)

  • Report this Comment On November 11, 2008, at 12:31 PM, Slipswitch wrote:

    I've found there are not scary stocks, only scary selling strategies. Unfortunately Motely Fool seems to wait until a stock is at about 20% of the buy price to sell the losers. Between MF and the crash, I have learned that a selling strategy is at least as important as a buying strategy. NVDA recommendation went to 5 X cost and back down to cost basis because it may be the 1 in a million that could be the next Microsoft. Others like JBLU were alowed to wither to almost nothing then became sell recommendations. At least MF has taught me not to believe in buy and hold. From now on I will take profits and cut losses at a reasonable point.

  • Report this Comment On November 11, 2008, at 12:43 PM, rbnlaw1 wrote:

    OK, profit dropped 97% in the fourth quarter due mainly to store closures. On the up side, revenue was up 3% over last year. Let the store closures heal and the masses turn to their lattes for comfort. The Mermaid will rise again. . .or I burn every SA newsletter I've received.

  • Report this Comment On November 11, 2008, at 3:50 PM, kyddfool wrote:

    i am not impressed with this Mueller's articles...........who is he and what are his credentials?

  • Report this Comment On November 12, 2008, at 6:53 AM, rmiers1 wrote:

    I bailed on the greedy seattle bunch when in Rockport Tx, I plopped down for my overpriced Americano and tried to light up my laptop and found out that it no longer worked in the caffine cave without paying for much does that cost????. I told the wierd staff, they had lost a lifetime customer and found connections at the library and of all places, Dairy Queen.

    A pox on greed and monopoly in this country. Let the eat all their high priced real estate....and they are certainly are not cool.....the suit that made that decision should be run out of town. 7-11 has the best value in coffee, service and price and for what I can save avoiding SB, I can afford an air card. 30 miles down the road, in Corpus Cristi, the whole town is WI FI....maybe the jerks think they can charge for air to breath....but not this fool

  • Report this Comment On November 12, 2008, at 10:42 AM, BeboLindo wrote:


    GREAT observtion. TMF is a good stock-BUYING advice service, but remains a lousy SELL-POINT advice service. Perhaps they could work on improving this important part of our investing sphere? I know it is where I have the most pressing needs for good information.


    As I have posted elsewhere, perhaps a more nuanced sell advice would be a benefit. Like "risk is rising... we recommend HOLD for risk-tolerant investors, and for less risk-tolerant, consider SELL." instead of the same advice across-the-board for all subscribers.


    I recognize this potentially complicates their score-keeping, but I think me losing tens of thousands of dollars and collectively TMF subscribers losing tens or hundreds of millions of dollars should outweight these type concerns!


  • Report this Comment On November 12, 2008, at 11:09 AM, derickincj wrote:

    I was incredulous when Million Dollar Portfolio added Starbucks in March and more in July. My posted comment to this effect was not well received. So glad I did not buy. MDP paid $16.20 average cost - now trading below $9.50 - and it is still rated a BUY. Sure, better to buy now, but I agree with the CAPS consensus - this company has a scary future and I would add: shrinking moat and increasingly frugal customer base - whether they like it or not. The days of $4-5 cups of coffee are over. Dx

  • Report this Comment On November 14, 2008, at 4:26 PM, hobed wrote:

    I think that, after the last few days, the "scariest" stock, maybe for all times, has to be GM. At least SBUX has a plan, and a chance to return to its roots and come back. GM? I ask you.

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