This Week's 5 Dumbest Stock Moves

Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dizzyingly dumb financial events from the past seven days.

1. It's going to be a pfight to the pfinish
The worst thing about Pfizer's (NYSE: PFE  ) acquisition of Wyeth is that it came with quite a bit of baggage. A pair of verdicts this week sided with women who claim that Wyeth's hormone replacement therapies caused them to get breast cancer. Pfizer is now on the hook for $103 million in punitive damages, with thousands of cases pending.

Pfizer is appealing the decision, of course. A lot can happen through the slippery slope of legal channels. This is just a grim reminder that acquisitions can't be perceived exclusively as incremental events.

2. Androids are on a steady diet of apples
Is Apple (Nasdaq: AAPL  ) getting too cocky for its own good? Android-powered phones are gaining market share, with an app-store ecosystem that topped 17,000 programs this month.

Apple fans may note that Apple's iPhone is also gaining market share. Oh, and its App Store recently blew past the 100,000-application mark.

True, Droid and other Android-propelled smartphones are nibbling away at other, less popular smartphone players. However, that has to be problematic for Apple, since many developers have been complaining about Apple's prolonged approval process and draconian rejection standards. The developer of Facebook's official app -- one of the App Store's most popular downloads -- handed off future updates to presumably lesser engineers at Facebook earlier this month, fed up with Apple's policies.

Will other developers follow? The argument goes that the iPhone and iPod touch are too popular to ignore. Programmers will have to take Apple's cake and code it, too. What happens if the open Android platform becomes more viable? Case studies are littered with niche leaders that let arrogance lead to their downfall.

3. Bing cross beat
You can't teach old media some new media tricks. Rupert Murdoch had made it known that he wanted digital versions of his global fleet of newspapers unsearchable from the leading portals. Now he's warming up to Microsoft (Nasdaq: MSFT  ) , working on a deal that would make Bing the exclusive online search source for Murdoch's publications.

Murdoch wants to get paid for his online content -- a noble aim. Unfortunately, he's looking gift leads in the mouth -- blaming referrers for old media's inability to profit from the ad-supported model in cyberspace.

Bing is cool and gaining in popularity, but it also commands minuscule market share. Let's put this in terms that Murdoch will understand: When you're trying to sell newspapers, you place vendors on busy intersections, or arm newsstands and dispensers on pedestrian-heavy corners. Why would you restrict someone to selling this morning's paper in an alley, dirt road, or blue-highway rest stop?

If Murdoch's aim is to stand firm on pride and reach a fading audience online, the exact same model now failing in print will collapse in cyberspace, too.

4. Mattel meets mayhem, again
Mattel (NYSE: MAT  ) can't seem to catch a break. A recall of 147,000 Fisher-Price cribs is part of a larger call to get 2.1 million defective drop-side cribs fixed or replaced. As of earlier this week, there had been four infant deaths and several more fall injuries resulting from drop-side detachments.

It's just another blow to Mattel, just when it was getting over its toxic lead paint fiascos.

This wasn't going to be a good holiday season for the leading toymaker anyway. It's been losing ground to its smaller rivals, and parents overbidding on Zhu Zhu hamsters may have less money to spend on Mattel playthings this year.

5. Not so cool beans
Bean juice is hot in more ways than the obvious these days. Green Mountain Coffee Roasters (Nasdaq: GMCR  ) is in a bidding war with Peet's Coffee (Nasdaq: PEET  ) for K-Cup specialist Diedrich Coffee (Nasdaq: DDRX  ) .

In a blow-by-blow summary:

  • Peet's bid $26 a share in cash and stock for Diedrich.
  • Green Mountain crashed the nuptials by offering $30 a share in cash.
  • Peet's countered with a $32 offer in cash and stock.
  • Green Mountain came back with a $32 all-cash proposal.

Peet's stock has slipped since its latest offer, so Green Mountain's cash deal is worth quite a bit more at the moment. Diedrich is giving Peet's until Monday to raise its bidding card.

Now, Diedrich isn't a dummy here. It's the Olive Oyl being fought over by two angry sailors. Peet's and Green Mountain are the chumps. If Peet's raises its offer, it's only going to send its stock even lower. As for Green Mountain, why does it want Diedrich in the first place?

Green Mountain owns Keurig, the company cashing in on the single-cup brewer craze. It's already profiting from Diedrich's success. It would probably benefit if Peet's also became a player in marketing K-Cup portion packs.

Then again, maybe Diedrich shareholders should be scolded. The stock closed at $33.22 a share on Wednesday, anticipating a beefed-up offer from a company that probably can't afford to stay in this auction.

Let's beat the dumb drum:

Green Mountain Coffee Roasters is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. Microsoft and Pfizer are Motley Fool Inside Value recommendations. Motley Fool Options has recommended a diagonal call on Microsoft. Try any of our Foolish newsletter services, free for 30 days. That certainly wouldn't be a dumb move.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. He does not own shares in any of the stocks in this story. Rick 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 (0) | Recommend This Article (7)

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.

Be the first one to comment on this article.

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: 1053979, ~/Articles/ArticleHandler.aspx, 10/1/2014 4:39:11 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...


Advertisement