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 dumb financial events this week that may make your head spin.

1. Bad buy Ruby Tuesday
Excuses are on the menu at Ruby Tuesday (NYSE: RT  ) .

The casual dining chain posted dismal quarterly results on Wednesday.

Comps fell at company-owned restaurants, and earnings fell despite Wall Street targeting a slight uptick in profitability.

Companies come up short all of the time, but Ruby Tuesday makes the cut for this week's list because of its creative excuses. Negative comps? Let's blame the severe winter weather on the East Coast, even though regional chains in the area appear to have held up OK. Pinched margins leading to the miss on the bottom line? Let's blame initiatives that were supposed to improve comps, including a commitment to serve fresh bread with every entree.

Fresh bread? Really? Isn't that what stock sellers are looking at after yesterday's 18% plunge?

Goodbye, Ruby Tuesday. Who can lay the blame on you?

2. A Sirius change of heart
Analysts don't always get it right.

Gabelli's Brett Harriss downgraded shares of Sirius XM Radio (Nasdaq: SIRI  ) -- from buy to hold -- five months ago.

"Sirius needs time to grow into its valuation," he wrote at the time. The stock seemed overpriced at $1.55.

Harriss upgraded the satellite radio provider this week, even though the stock was at $1.78 before his bullish turn.

In other words, Sirius XM didn't just grow into its valuation at $1.55 a pop: It outgrew it!

3. Tablets get into the game
Who needs free versions of Angry Birds on your iPad or Android tablet when you can spend good chunk of change to play games on your GameStop (NYSE: GME  ) tablet?

Yes, the leading video game specialty retailer is considering putting out a gamer-centric tablet.

"If we can't find one that's great for gaming, then we will create our own," chain President Tony Bartel told gaming website Gamasutra this week.

This is a bad idea on a few different levels.

For starters, there hasn't been a tablet outside of the iPad that has actually been an undisputed hit. This is still a market that hasn't caught on outside of Steve Jobs' "magical" contraption.

Then we get to GameStop's goal of putting out full-priced games. This may be sweet music to software developers, but there's a reason why everyone flocks to the $0.99 and free ad-supported games. They may not be as full-featured as console game, but they're a great value. A GameStop tablet is going to have a hard time justifying a $400-$700 initial investment if the titles are expensive.

The final head-shaking moment here is that if GameStop does throw its weight behind a tablet won't it be competing with the console and handheld hardware makers that it relies on for in-store inventory? It may win over some of the developers that were bent on dismissing GameStop during the digital migration, but GameStop's chain won't go far if it's seen as a conflict of interest by the hardware heavies.

4. Hop on pop
SodaStream
(Nasdaq: SODA  ) has many of the ingredients that investors like in consumer-facing growth stocks.

SodaStream has millions of owners of its stylish and practical water carbonation systems. Its product excels on nutritional and eco-friendly merits. The shares have also more than doubled since going public late last year.

Why crash that party?

Shares of the pop star took a hit this week when the company announced a secondary offering. Most of the 5 million shares being offered are from existing shareholders, spooking investors who see this as a massive wave of insider selling.

Hot IPOs often do this as they close in on the end of their lock-up periods, but it doesn't make it any easier to stomach.

5. Thin crust
GSI Commerce
's (Nasdaq: GSIC  ) ShopRunner is getting desperate.

Domino's Pizza (NYSE: DPZ  ) is offering free delivery on online orders for those paying $79 a year to be part of ShopRunner's shopping program.  

ShopRunner is the bricks-and-mortar response to Amazon.com's (Nasdaq: AMZN  ) wildly successful Prime subscription. Members of Prime and ShopRunner receive free two-day shipping on orders. The different here is that ShopRunner represents three dozen different retailers including Toys "R" Us and The Sports Authority.

I'm not sure if free pizza delivery is a major motivator. My local Domino's charges $1.75 on most orders. One has to go through a lot of delivered pies to make that $79 back. It also probably doesn't help Domino's to be prominently promoting that it charges these delivery fees.

I can appreciate ShopRunner's creative thinking, but it's ultimately just letting us all know why it will never catch up to Amazon Prime.

Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.

SodaStream International is a Motley Fool Rule Breakers pick. Amazon.com is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended writing covered calls on GameStop. The Fool owns shares of Domino's Pizza and GameStop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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 (5) | Recommend This Article (5)

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 April 08, 2011, at 10:08 AM, Stable77 wrote:

    You should have added Motley Fool's hyped campaign about "the secret stock that will outperform all others" that we were hounded with for months and months in emails and advertisements.

    Rosetta Stone (RST) turned out to be the biggest flounder of the last 3 months ... shame on you Motley Fool.

  • Report this Comment On April 08, 2011, at 10:32 AM, arm57rong wrote:

    GameStop confirms all major decisions with the vendor before making any important moves such as this one. Why wouldn't Microsoft want GameStop to compete with Apple when Iphone is kicking Windows Phone's ass. All the Apple products are interconnected, and you forget the power Gamestop has to Market the Big 3 through their Tablet, if one exists.

  • Report this Comment On April 08, 2011, at 11:20 AM, Polarbearblue wrote:

    I think the whole $79 for free delivery on pizza is stupid, but I feel GameStop's choice to offer a gaming tablet does it. Let me honest, Apple is a luxury brand. And while have another tablet to combat Apple sounds good, I feel it's all in vain. I mean, did Microsoft have a chance to monopolize this market early on. I remember hearing they ( or some other company) was/did have a tablet before Apple considered the iPhone. Plus, I serious doubt gamers want a hardcore gamming tablet that can replace handheld games. Besides, that will hurt the handheld gaming industry. The same industry Nintendo and soon Sony is try to bring back.

  • Report this Comment On April 08, 2011, at 8:37 PM, jimmy4040 wrote:

    I wish I could remember the name of the RB who predicted months ago that SODA would do just this. Now watch them pump and dump some more until all the insiders have most of their money out.

    If you're a trader riding the wave, good for you. If you're holding for the "long-term" . . .

  • Report this Comment On April 10, 2011, at 3:07 PM, Varchild2008 wrote:

    Might be smarter for Gamestop to work with 1 of the big 3 such as APPLE to produce a Gaming Specific Tablet...rather than create their own.

    Gamestop did say their first resort was to do just that...work with existing manufacturers to see if they can create a gaming tablet with bluetooth controller.

    It would be Gamestop's last resort to actually make one themselves.

    If they do make a Gaming tablet it would have to offer such unique features that everyone would graviate to it for its uniqueness. I understand it is difficult to compete with APPLE...

    But what about Nintendo 3DS? Seems to me the Nintendo 3DS as well as its previous editions have successfully competed with APPLE for many, many years.

    It is NINTENDO and not APPLE after all that has the lions share of the mobile, gaming, platform market share. APPLE can lose and it already is.

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