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. Start spreading the news
What a difference two years make.

"For most newspapers in the United States, we would not buy them at any price," Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett proclaimed during his company's annual shareholder meeting two years ago. Print publications face "the possibility of nearly unending losses," he warned, given declining circulation levels and ad revenue.

Well, Berkshire struck a deal on Wednesday to buy the company behind Buffett's hometown Omaha World-Herald and six other small town dailies in a $200 million deal.

Buffett's justifying the move by stating that the publisher "delivers solid profits," but the flagship paper has already shed a quarter of its readership over the past five years. That trend isn't going to reverse itself, and digital profits will probably never be enough to cover operating costs for sizable newspaper operation.

Maybe I'm biased. Here in Miami, the local paper recently sold its building to an Asian gaming giant in exchange for a tidy sum. Terms of the deal call for The Miami Herald to have free rent for two years before the structure is razed to make way for a massive waterfront resort. This isn't an industry that's bottoming out. It's in a perpetual fade.

If nostalgia attracted Buffett to preserve the local paper, let him take on that pet project on his own dime. He doesn't have to drag Berkshire Hathaway shareholders into this questionable decision.

2. Soda sippers see red
Coca-Cola (NYSE: KO  ) figured it would get into the holiday spirit by updating its Coke cans for a seasonal run.

Decked out with polar bear silhouettes and tied to a corporate donation to the World Wildlife Fund for the sake of Arctic conservation -- what could go wrong?

Well, someone wasn't thinking at the beverage giant, because folks are apparently confusing the white Coke cans with the silver Diet Coke cans. Coke is responding by quickly adding red cans with the same polar bear design, but as long as the white cans are out there, the confusion will continue.

This obviously isn't a fiasco of New Coke proportions, but anyone who sees the similarities between the white holiday Coke cans and silver Diet Coke cans had to know that there would be a problem at convenience stores, vending machines, delis, and any place where cans are purchased individually.

3. Bumpy landing
AMR's (NYSE: AMR  ) stock cratered after the parent of American Airlines filed for Chapter 11 bankruptcy protection.

I tried to warn you.

"AMR is the only major airline that's expected to post a loss this year -- and a widening deficit at that," I wrote when I urged investors to throw AMR away in October. "The combination of passenger-milking fees and steady fares has created an environment where you have to be pretty bad to not make money."

"Buckle up. There's turbulence ahead."

Given its out-of-whack cost structure, it was really just a matter of time before it caved to its creditors.

Bankruptcies happen, but that isn't enough to nab AMR a spot on this week's list of dumb moves. The stupidity nod here goes out to the investors that bid shares of AMR higher on Wednesday and Thursday after the stock tanked on Tuesday's bankruptcy news.

Why are folks drawn to penny-stock speculations? AMR has a net debt position of $12.6 billion. Is there any doubt that today's AMR shares will be canceled? More often than not, post-filing gamblers get burned when their shares are deemed worthless.

4. Nook and cranky
Analysts figured that Barnes & Noble (NYSE: BKS  ) would post a small profit in its latest quarter. It's a dumb Wall Street call that didn't seem possible. The bookseller is losing money online, its stores are thinning out as folks abandon leafy reads, and it's forced into selling e-readers at ridiculous price points to remain competitive.

Well, shares of the bookstore chain fell 16% yesterday after the company posted a stiff deficit and a slight decline in revenue.

Folks will say that the terrible quarter surprised the market, but really this shouldn't be much of a shock to anyone following this story.

5. Office space
Unconfirmed reports surfaced this week, suggesting that Microsoft (Nasdaq: MSFT  ) is working on a Microsoft Office app for Apple's (Nasdaq: AAPL  ) iPad.

This may seem like a move that's long overdue. There are already plenty of word processing, spreadsheet, and presentation modules available for the tens of millions of iPad owners. Microsoft can't really afford to ignore this market. However, the other side of the argument is that supporting iOS and eventually Android validates those platforms. Why would someone need Windows if the more than 400 million activated iOS and Android devices can fit the bill?

We continue to move toward the operating system agnostic realm dominated by cloud computing. Does Microsoft really want to pick up the pace in that direction?

Sure, Microsoft does have a Mac version of its productivity suite, but Mac's premium ways have never been a material threat to Windows. It's an entirely different game in the world of tablets and smartphones, where Apple and Android rule the roost.

If you want to track these companies to make sure that they don't make another dumb mistake soon, consider adding them to My Watchlist.

The Motley Fool owns shares of Apple, Microsoft, Coca-Cola, and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Apple, Coca-Cola, Berkshire Hathaway, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft and Apple. 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. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. 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.


Read/Post Comments (7) | Recommend This Article (6)

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 02, 2011, at 10:51 AM, foolindeed1 wrote:

    BKS cut the loss in half compared to last year. Borders closing benefits hasn't kicked in yet and will only show up in this quarter.

  • Report this Comment On December 02, 2011, at 12:47 PM, demodave wrote:

    I have a hard time calling MS dumb for developing Office on mobile platforms. Those low cost (relative to PCs, even, to say nothing of Macs) *will* proliferate in enterprise applications. Some of those apps will surely be intranet and customer/proprietary driven, but not all. If MS wishes to remain relevant, it needs to port it cash cow to those new platforms. After all, that is what made RIM relevant.

  • Report this Comment On December 02, 2011, at 6:17 PM, cybrosia wrote:

    >>>Well, shares of the bookstore chain fell 16% yesterday after the company posted a stiff deficit and a slight decline in revenue.<<<

    And rose nearly 11% today. It is a tough, volatile fight B&N is engaged in. You might actually try looking at BKS without your ingrained bias toward Amazon. You likely do not even see the coming publisher revolt against Amazon, do you? It has already started. Oh, well.

  • Report this Comment On December 02, 2011, at 10:12 PM, rdare wrote:

    FOOL'S QUOTE:

    "The bookseller is losing money online"

    REALLY?

    FACT:

    - "BN.com sales increased 17% over the prior year, from $177 million to $206 million. Comparable sales increased 38%, on top of a 59% increase a year ago. This increase was driven by continued growth of digital content sales and purchases of award winning NOOK™ devices."

    http://www.businesswire.com/news/home/20111201005839/en/Barn...

    FOOL'S QUOTE:

    "its stores are thinning out as folks abandon leafy reads, and it's forced into selling e-readers at ridiculous price points to remain competitive."

    - REALLY?

    - Is $199 Kindle Fire price point less ridiculous than $249 Nook price point

    BKS FACT:

    Yes, it still lost money, yet, when compared to last year:

    "Earnings before interest, taxes, depreciation and amortization (EBITDA) grew 21% over the prior year, from $46 million to $56 million."

    http://www.businesswire.com/news/home/20111201005839/en/Barn...

    FOOL'S QUOTE:

    "Well, shares of the bookstore chain fell 16% yesterday after the company posted a stiff deficit and a slight decline in revenue."

    - REALLY? Did you specifically pick the lowest point during the day to make a point?

    ~

    I used to pay attention to Fools many many years ago, now it seems like there isn't a hint of original opinion. Blah-blah-blah-Amazon-Blah-Blah-Blah-Barnes-And-Noble-Bad. Useless articles at a rate of 15 a day.

  • Report this Comment On December 02, 2011, at 10:43 PM, rdare wrote:
  • Report this Comment On December 04, 2011, at 2:51 PM, nickjob wrote:

    The fool is missing the most crucial investment issue of the year; mf global and the theft of customer funds by jon corzine. If he gets away, you won't have to recommend anything because nobody will want to invest.

  • Report this Comment On December 04, 2011, at 5:44 PM, Mega wrote:

    "Is there any doubt that today's AMR shares will be canceled?"

    To answer your rhetorical question, yes. In bankruptcy, there is doubt about everything.

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