This Week's 5 Dumbest Stock Moves

By Rick Aristotle Munarriz | More Articles
June 19, 2009 | Comments (8)

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Stupidity is contagious. It gets us all from time to time -- even respectable companies. So, just as I do every week, let's look at five dumb financial events this week that may make your head spin.

1. I think Zicam
What's that smell? Shares of Matrixx Initiatives (Nasdaq: MTXX ) took a 70% dive on Tuesday, after the FDA warned that the company's Zicam Cold Remedy nasal gel and swabs could cause a permanent loss of smell.

This is the kind of hit that would sting even the largest of pharmaceutical giants. Obviously, it can be catastrophic for a small fry like Matrixx, as it braces for legal action after the recall.

2. There's a lot more space in MySpace these days
The inevitable happened. According to the traffic-tracking mavens at comScore, Facebook has now passed MySpace in popularity. Facebook added 2.8 million unique visitors in May, to close out the month with nearly 70.3 million users. News Corp.'s (NYSE: NWS ) MySpace, on the other hand, shed 0.7 million unique visitors. Both sites are still huge -- with roughly 70 million unique monthly visitors apiece -- but we know which site has the momentum.

If you still can't separate the bleeder from the leader, look for the pink slips. Shortly after comScore's report, MySpace announced that it will eliminate nearly 30% of its employees. What will the dismissed MySpace-ians do? Will they try to network for a new gig through LinkedIn? Will they try to reconnect with old classmates on Facebook? One thing's for sure: They're unlikely to be on MySpace.

We can't throw in the towel on MySpace just yet, though. A springtime shakeup at the top begs for a little patience to see what fresh minds can do with a tiring property. However, a few more months of defections, and you may as well write off the site's relevance.

You have to pity News Corp. The company could probably have unloaded MySpace for a pretty penny to a hungry Web portal a year or two ago. Now it's being sent to the clearance rack out back to make room for cooler Web 2.0 destinations such as Facebook and Twitter.

3. Turning a Buffett feast into a Buffett buffet
The Chicago Board Options Exchange is turning investors into speculators, having launched Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) stock options yesterday. That's right. You can now buy into buy-and-hold guru Warren Buffett -- the "my favorite holding period is forever" investing genius -- with options on Berkshire's Class B shares that expire as soon as next month.

The CBOE doesn't have to have Berkshire Hathaway's blessing, but this move is just ridiculous. Now, I realize that Berkshire Hathaway has dabbled in derivatives. Options can also be used to reduce risk, as we see with a strategy of covered calls. But who are we kidding? Most of the dabblers in these new options are likely to be speculators looking to score short-term gains on the market's volatility.

I'm sorry you had to see this, Buffett.

4. Baba-blew-it
Sirius XM Radio (Nasdaq: SIRI ) finally launched its official online streaming program through Apple's (Nasdaq: AAPL ) App Store, but it's missing its biggest rock star and a lot of the NFL, Major League Baseball, and NASCAR content that attracted listeners to satellite radio in the first place.

Really? No Howard Stern? That's an odd move for a music-content offering that's already taking a major gamble by charging listeners in a realm of free, ad-supported App Store offerings.

Stern has just 18 months left on his five-year contract with Sirius XM, so the satellite-radio operator has to hope it can square away the details while negotiating a contract extension. However, Sirius XM really blew it by not having its biggest attraction on board in its highly anticipated app.

5. Putting the "buy" in Baidu
You know that kid who has seen Star Trek or Twilight a dozen times? That may be Goldman Sachs. The company raised its near-term price target on Baidu (Nasdaq: BIDU ) and now expects the stock to hit $350 instead of $300.

Upgrades rarely make it to this weekly "dumb" list, but this nod is going out to Goldman Sachs. Just two weeks ago, it upped the price target from $273 to $300.

The fundamentals haven't improved substantially for Baidu over the past 10 trading days. Analysts may want to revisit the usage of setting price targets if "near-term" becomes biweekly. Wouldn't it have just been easier to raise the target from $273 to $350 two weeks ago?

Let's beat the Dumb Drum:

Last week's dumb moves.
The previous week's bonehead moves.
Last year's silliest CEO quotes.

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Baidu is a Motley Fool Rule Breakers selection. Apple and Berkshire Hathaway are Motley Fool Stock Advisor picks. Berkshire Hathaway is a Motley Fool Inside Value recommendation. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves alike. Investors can learn plenty from both. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (8)

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 icon found on every comment.

Report this Comment On June 19, 2009, at 4:31 PM, m55555 wrote:

YOU WILL GO BROKE BEFORE SIRIUSXM,THIS IS TRULY A RAG MAG................
Report this Comment On June 19, 2009, at 6:00 PM, Truther wrote:

Now is NOT the time for Matrixx Initiatives (MTXX) or its stockholders to panic. The FDA sites 130 complaints over a TEN YEAR period. It looks like Matrixx Initiatives also "failed to mention" that they also registered about 800 other complaints of ALL kinds over the same period. So what do we have here? About 1000 complaints over ten years? Or about 100 per year? Out of HOW MANY doses of Zicam . . . a BILLION? At this time I have to give Matrixx Initiatives the benefit of the doubt on this one. As they stated on Thursday, "How many cases of anosmia would have occurred in these users had they NOT used Zicam?" Statistically the number of people that suffered anosmia after using Zicam is in the "Normal" range of people that would have lost their sense of smell anyway. By age 80, your sense of smell will work about half as well as it did when you were 30. Matrixx Initiatives has had to only settle one lawsuit and that was purely a financial decision. As for the FDA it appears that the "Obama Bunch's" attempt to "fix" our "broken society" has gone off a little half cocked. Before you rush out to sell your shares of Matrixx Initiatives you might want to wait and see what happens for the next ten days. Matrixx Initiatives has yet to meet with the FDA, and even though it is unlikely that the FDA will "back down" it's NOT out of the question that they will amend their stance once "adults" get involved. From a purely business point of view. Matrixx Initiatives says that Zicam accounts for about 40% of sales (with 70% MARGINS!). That's still less than half so a simple formula is that a $20 stock cut by 40% is now a $12 stock (OK, how about an $8 stock given worst case?). Plus, IF there is any litigation that comes from this (probably) that is still YEARS away. Remember the FDA has NO PROOF, only complaints from users, that Zicam has any bad side effects. AND Matrixx Initiatives HAS already proved that in court. So stay calm investors and don't panic. NOW might be the best your BEST opportunity to BUY Matrixx Initiatives.
Report this Comment On June 19, 2009, at 7:15 PM, pvmaro wrote:

The Fool has written a lot about SIRI and well it might. It is an exciting medium with, you wil see, a global reach not dependent on the vagaries of American car makers. Their "flawed" i-app will do just fine. Free is nice but their content is worth a couple of bucks. What's it cost to rent a DVD? I realize that Howard Stern is a national treasure but is his not being a freebie an app-flaw. Is SIRI not giving away their extensive sport coverage, that others pay premium rates for, foolish? NAB and other powerful interests are very threatened. It's the most shorted stock on the market whose pps does not reflect it's size, subscription base, etc. One might expect more balance by the Fool. You read like biased bashers.
Report this Comment On June 19, 2009, at 11:42 PM, siriradio wrote:

BASHER
Report this Comment On June 20, 2009, at 1:33 AM, rrrllrrrll wrote:

#1 DOWNLOADED APP - RECORD #'S -OOPS.
Report this Comment On June 20, 2009, at 6:31 AM, dpy414 wrote:

I realize that Howard Stern is a national treasure for some. But I wouldnt listen to him if it was free so I sure would not pay to listen to him SiriusXm has much more to listen to than talk for those of us that listen to music it is high quality music that is cheaper and easier than CD's. It looks like the way you ( The Fool ) is always bashing Sirius that you have something personal against the Co. ( Sirius ) ? You cant wait to post negitive comments when you get the chance I see alot of good info from time to time on here. But you dont have anything positive to say about Sirius.
Report this Comment On June 20, 2009, at 8:46 AM, JB761 wrote:

I have had Sirius radio for just over a year and wonder how I ever got along without it. Unfortunately, the company is an easy target for shorts as well as bashers. They have a history of overpaying for content. If you remember, Howard Stern sold his shares before the ink was dry on his contract. Simple math: Total annual revenues $30 million. My salary $100 million. Since he has lost the majority of his listeners after switching to Sirius, it is unlikely he is a factor anymore. It would seem Apple realized this. Perhaps you might confirm this by comparing the two stock prices.
Report this Comment On June 22, 2009, at 1:19 PM, xxtraderxx wrote:

Hey Munarriz, wernet you saying to buy Baidu 2 days ago in the article "BUY baidu everyone is doing it"? and hyping up the GS upgrade? Now your calling it dumb?

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