1-Star Stocks Doomed to Drop: Developers Diversified

Based on the aggregated intelligence of 120,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, shopping-center REIT Developers Diversified (NYSE: DDR) has received the dreaded one-star ranking. Our data has shown that one-star stocks woefully lag the market average; conversely, five-star stocks outperform the S&P by a significant margin.

With that in mind, let's take a closer look at Developers Diversified's business, and see what CAPS investors are saying about the stock right now.

Developers Diversified facts

Headquarters (founded)	Beachwood, Ohio (1965)
Market Cap	$596.56 million
Industry	REIT
TTM Revenue	$974.20 million
Management	CEO Scott Wolstein (since 1992) CFO William Schafer (since 1993)
Return on Equity (average last five years and TTM)	9.9% and 5.6%
Competitors	Kimco Realty (NYSE: KIM), CBL & Associates Properties (NYSE: CBL)
CAPS members bearish on DDR also bearish on	XL Capital (NYSE: XL), Pulte Homes (NYSE: PHM)
CAPS members bullish on DDR also bullish on	Citigroup (NYSE: C), Apple (Nasdaq: AAPL)

Sources: Capital IQ (a division of Standard & Poor's), and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, 167 of the 282 members who have rated Developers Diversified -- some 59% -- believe the stock will underperform the S&P 500 going forward. These bears include zorgblack and CAPS All-Star uclayoda87.

In late October, zorgblack used some simple logic to support the bear case: "Empty malls, empty shops, empty dividend."

In a more recent pitch from last month, uclayoda87 points to Mr. Market, himself, as a possible sign of bearish things to come:

Asset sales and cost cutting activity in the last two months, but the stock price keeps dropping, which suggests that they are not bailing out the boat fast enough. I suspect vacancy rates will rise and some tenants will go bankrupt causing further problems with revenue. Uncertain if their cash position is strong enough to weather this financial storm.

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