1-Star Stocks Doomed to Drop: Developers Diversified

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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.

What do you think about Developers Diversified, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. CAPS is 100% free, so simply click here to get started.