4 More Stocks Enjoying Their Last Christmas

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To celebrate the holidays, we here at the Fool are devoting extra virtual ink to all things consumer-focused in a special section called "The 12 Days of Christmas." Over the coming days, we'll have our "12 Days of Content" surrounding consumer-focused names that look set to profit or perish amid the holiday cheer.

Whether we're kids or investors, we all want to see a present under the Christmas tree in one form or another. For the younger crowd, it might be a train set or a new doll, while investors look to unwrap stocks that will turn into the next 10-bagger. Sometimes, though, everyone finds a lump of coal in his or her stocking.

Last year, I chose four companies I thought would spoil any Christmas cheer, and while only Blockbuster ended up in the dustbin, the other three still darkened the spirits of investors everywhere. In a year that saw the S&P 500 rise nearly 11%, Sears Holdings, Radio Shack, and Borders Group (NYSE: BGP  ) were all are down near 10%.

So which companies do I think are akin to lumps of coal in the stocking this year? While Sears continues to dwindle in the face of Wal-Mart and Target, its case for going completely under doesn't seem particularly strong. And even though Radio Shack still doesn't seem relevant despite Best Buy's (NYSE: BBY  ) recent stumble, its electronic doodads do serve a niche, but I wouldn't count on investors hoisting a warm cup of wassail for either of them this time next year.

Rip out the pages
Borders has also found something of a lifeline, with hedge fund operator Bill Ackman expressing a desire to help it take over Barnes & Noble, though a buyout in the other direction might make more sense. Revenue dropped 18% in the third quarter, and same-store sales declined by 12.6%, while online sales decreased 8.6%. But because it looks like it may violate its credit agreements by the first quarter of 2011, I think the bookseller has a chance to join Blockbuster as a ghost of Christmas past.

So I'm re-upping my bet that Borders will find itself on the list of companies that are seeing their last Christmas, and I'll add the following three, too.

The office is closed
Forget the disgrace of being kicked out of the S&P 500 -- office supplies retailer Office Depot (NYSE: ODP  ) is likely to be kicked to the curb permanently. Both it and rival OfficeMax had been subject to possible buyout rumors, as the economy has wreaked havoc with business purchases of paper clips, rubber bands, and correction fluid.

To get to a surprise $0.04-per-share profit last quarter, Office Depot had to slash overhead. That's a fine short-term remedy, but pressure from its biggest competitor, Staples (Nasdaq: SPLS  ) , means it's going to need additional ways to hold the line on costs. That's not an easy, repeatable solution, particularly after its CEO resigned following violations of Regulation FD rules. Office Depot is a stock that will be left at the station.

Don't bank on it
It's a race to the bottom for both Bank of Ireland and Allied Irish Banks (NYSE: AIB  ) , but it appears inevitable that the Emerald Isle's government will eventually assume control over these financial institutions, perhaps as early as this week. The government has told the banks they need to raise much more capital to solidify their financial position, with Bank of Ireland having to come up with 2.2 billion euros and Allied needing a gargantuan 9.8 billion euros by the end of February. Government support for Bank of Ireland could swell to as much as 80%, but Allied will likely see the government assume a 95% ownership stake after injecting more capital.

Many investors buy into the notion that like Anglo Irish Banks, both Bank of Ireland and Allied will be too big to fail. Certainly the government is trying to prop them up, but the fault lines may be too wide, and either or both could be swallowed up. The luck of the Irish appears to have run out with investors left overdrawn. Effectively, Allied might not even see this Christmas, let alone next year's.

A prescription for disaster
You'll need a heavy sedative to stay invested in pharmacy chain Rite-Aid (NYSE: RAD  ) . The stock has posted yet another quarterly loss, even as it says that adding groceries to its lineup through a partnership with SUPERVALU helped bolster sales. Yet that trend's already being pushed by the more successful Walgreen (NYSE: WAG  ) , which was looking to differentiate itself from CVS Caremark. In the most recent quarter, Rite-Aid's revenue was still off from the year-ago period. Same-store sales were down more than 1%, prescriptions filled were off almost 2%, and management was forced to lower its full-year forecast yet again. The company needs some stronger medicine than just selling groceries to be able to make it another year.

Not the brightest bulbs
These stocks are colder than the frigid temperatures outside, and the struggling economy means that some of them -- maybe all of them -- won't be around to usher in 2012.

Do you agree that Borders is at the end? Is Allied Irish Banks about to close its account? Will Office Depot and Rite-Aid be tossed onto the yule log? Then go caroling in the comments section below, and let us know which company you think is enjoying its last Christmas.

Best Buy and Wal-Mart are Motley Fool Inside Value selections. Best Buy and Staples are Motley Fool Stock Advisor picks. Wal-Mart is a Motley Fool Global Gains recommendation. Motley Fool Options has recommended buying calls on Best Buy. The Fool owns shares of Best Buy, SUPERVALU, and Wal-Mart. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (10)

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 December 21, 2010, at 12:55 PM, prginww wrote:

    Re: Borders Books: On the one hand, I don't think Motley Fool is wrong. The company is in big trouble. Barring a merger with B&N, I don't see how it can survive another year.

    On the other hadn, Motley Fool has been predicting "Borders will be bankrupt THIS year" for the past two years running. Fool's prognostication record is pretty poor here.

  • Report this Comment On December 21, 2010, at 1:42 PM, prginww wrote:

    Borders has a turn around plan in affect. All the money that LEBOW and ACKMAN put in , they will loose in bankruptcies. I think a big player like APPLE or GOOGLE would buy them for there existing stores. Think about it, coffee I-PADS , Apps, and books all in one nice store.

  • Report this Comment On December 21, 2010, at 6:02 PM, prginww wrote:

    It's a tough year for a list like this, but not bad picks.

    I'd say Borders has about a 50-50 shot at bankruptcy, 95% if they don't get the BKS acquisition. Still the upside for them is huge if they do get it.

    I want to agree with you on Rite-Aid, but the altman-Z score does not. Particularly the sales/assets factor, which is absurdly high. They've wiped the lipstick off the pig, and it turns out it's not too bad.

    As far as the rest of the list goes; ODP, maybe, OMX, definitely. AIB... sure, why not.

    No airline stocks?

  • Report this Comment On December 21, 2010, at 8:25 PM, prginww wrote:

    Borders is like a cat with nine lives, but hearing that they fired a store manager for staying on the floor helping customers instead of taking a pep-rally conference call in the back office really shows how little management cares about true customer service.

  • Report this Comment On December 23, 2010, at 4:49 PM, prginww wrote:

    I also think Borders is a 50-50 shot at bankruptcy.

    But I don't think B&N is doing so hot either!

  • Report this Comment On December 29, 2010, at 11:07 AM, prginww wrote:

    Borders is an interesting case. Technically, I would call it a *walking zombie* and unless they have an over the top 4th qtr., they are in trouble. The real trouble will be in the next in which because of credit requirements, they have to maintain a certain liquidity and this won't happen.

    This stock would be history if it were not for the major investment of Ackman/Pershing Group and Lebow, the tobacco baron. As long as both maintain their stock investment, they can keep Borders in a *walking zombie* state indefinitely.

    Now as far as any merger with B&N- Ackman is well known for dropping hints that are design to raise the price of Borders stock and this falls in that category. Both have serious problems and will need to close at least half their stores. For B&N, the best route is to go private for a few years, do the restructuring, and then go public again. Borders doesn't have that option because of poor liquidity and stock value.

    Will they be around next- As long as Ackman and Lebow don't pull the plug, yes. Lebow bought in with 25 million at 2.84 per share- huge loss.; however the liquidity problem in relationship to credit extended to Borders will make this more difficult.

  • Report this Comment On December 29, 2010, at 11:29 AM, prginww wrote:

    One final note-

    Ackman/Pershing Group control about 37% and LeBow controls about 17%.

    This equals 54% or a controlling majority so there is a certain *floor* under Borders stock

  • Report this Comment On December 31, 2010, at 11:33 AM, prginww wrote:

    My lovely wife went on a post-Christmas shopping trip yesterday. She came home and told me she went to the new Borders in town and bought nothing because they have a terrible selection of books, worse than the tiny old B. Dalton store B&N closed last year. The store has removed books in favor of toys and music, cutting back all books except children's and encouraging people to get an e-book reader. That's the trick here - it's not a lack of customer interest, it's a lack of selection. I told my wife about this article and she agreed wholeheartedly with it's sentiments. RIP Borders.

  • Report this Comment On January 01, 2011, at 1:59 AM, prginww wrote:

    Per the Wall Street Journal, Borders has delayed payments to some of its vendors, which means they're out of money. Next week they won't make payroll and it will all be over. I am short several hundred shares of this company.

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