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. Shack attack
Things are getting rocky at your neighborhood RadioShack (NYSE: RSH  ) store.

The small-box retailer of wireless gear and a thinning array of consumer electronics got pummeled this week after posting troubling financials.

RadioShack's preliminary results for the holiday quarter find net sales holding up but margins taking an absolute beating. The near-term outlook isn't going to get any better, and investors ran for the exits in fear that this will be the next Circuit City.

Thankfully, it's not that bad. RadioShack is still profitable.

However, RadioShack nabs a slot in this week's "dumb" list for the share buybacks it completed this past quarter. RadioShack bought 930,000 shares at an average price of $12.80 during the final three months of last year. The stock closed at $7.29 yesterday.

Yep, that buyback was dumb.

2. My bloody valentine
I took plenty of lumps last week when I insulted the 15.4 million people who bought iPad 2 tablets last quarter. Why buy a new tablet when history tells us that Apple (Nasdaq: AAPL  ) updates its iPad line between February and April of the new year? This update is unique because many analysts believe that Apple will continue to sell the iPad 2 -- at a $100 to $200 discount -- when the iPad 3 hits the market.

I'm sorry about that. I may have gone too far. My own sister was one of those 15.4 million iPad 2 buyers during the holiday quarter.

However, now that juicy specs are starting to leak out and a release date is likely merely weeks away, is Apple going too far by tugging on heartstrings to sell the last batch of iPad 2 tablets at $499?

In a promotional email -- "iPad 2: A valentine they'll open every day" -- Apple tries to position its iconic tablet as the romantic gift of choice over chocolates, flowers, or jewelry.

"With apps, movies, books, and more they'll adore, iPad 2 will delight them on Valentine's Day -- and every day after," reads the marketing push.

I'm all for being sappy, but with the superior iPad 3 and potential price cut on the iPad 2 now weeks away, is buying an iPad 2 in February going to be a heartbreaker?

3. Amazon fails to put out the Fire
Amazon.com (Nasdaq: AMZN  ) took a hit after the leading online retailer posted disappointing quarterly results.

Sales for the holiday quarter rose by a softer than expected 35%. Earnings actually beat Wall Street estimates, but you won't find too many people willing to applaud a 58% decline on the bottom line. Clearly margins are taking the kind of beating that even RadioShack can laugh at. Making matters worse, the midpoint of Amazon's guidance for the current quarter calls for a small operating loss.

Oops!

However, since Apple tells us how many iPads, Macs, and iPhones it sells in any given quarter, would it hurt Amazon to give us the number of Kindles it actually sold?

The news is bad, Amazon. The least you can do is reassure investors by letting them know that the near-term emphasis on pushing Kindles at a loss will be worth it by telling them exactly how many e-readers and tablets sold this holiday season.

4. Book Barnes-ing
Barnes & Noble
(NYSE: BKS  ) is refusing to stock print books being distributed by Amazon's publishing arm at its bibliophile superstores.

It's just the latest tactical move in the relentless battle between Amazon and Barnes & Noble, but is this the right move for the brick-and-mortar chain? Sure, it would pain the retailer to sell books that financially benefit a rival. Amazon is playing some nasty hardball in digital exclusivity. However, is this really the correct path?

It's not as if Barnes & Noble can say that it's doing this on principle. It's still offering Amazon-published books through its BN.com website.

Yes, that's right. Barnes & Noble is trying to survive as a real-world retailer by sending some book buyers online for a book that it refuses to stock in its stores but will gladly sell you through cyberspace. Is it possible to shovel dirt on your own grave?

5. Go Fitch
Abercrombie & Fitch (NYSE: ANF  ) has a problem.

The once-hip apparel retailer took a spill after updating its outlook. We're just two weeks away from the real report, but it won't be pretty.

Comps are clocking in flat, but the real problem is what the mall chain is forced to do just to keep pace with last year's store-level sales. Gross margins are taking a pounding as Abercrombie & Fitch has been forced to reel back its markups.

Abercrombie & Fitch now sees a quarterly profit for its telltale holiday quarter of $1.10 a share to $1.15 a share. Flabby analysts were posing shirtless by their profit target of $1.55 a share.

It's just not happening, people.

Don't be a dumb investor. Check out the stocks that the smartest investors are buying. Sure, it's a free report. Check it out before it's gone.

The Motley Fool owns shares of Amazon.com, RadioShack, and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in 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.


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  • Report this Comment On February 03, 2012, at 2:58 PM, leonhart03 wrote:

    Yeah, stock Amazon books in their store... that would be a brilliant way to move product. [/sarcasm]

    Think of how much dead space they'd create by offering Amazon print books in their physical stores. Most people who want Amazon-specific titles are going to (what?) buy them from Amazon, because no doubt their are going to email/digitally blast all Amazon fanatics when their books come out.

    No, I believe that what Barnes & Noble should focus on is what the are already doing - diversifying their current displays by offering more than books. Their toys and games, seasonal gift and other impulse sections are exactly the thing those stores need to help mitigate the lost book sales due to e-book trends. Not to mention keep developing their Nook storefronts so more people can have a chance to try out devices without a waiting queue.

  • Report this Comment On February 03, 2012, at 3:18 PM, leonhart03 wrote:

    Hmm... thought I fixed that "their" typo. Bad grammar gnomes struck again!

  • Report this Comment On February 04, 2012, at 1:10 AM, kthup wrote:

    What few people seem to have considered is the quality of the books that will be sold under Amazon's label. The majority of these will be titles that are already public domain, were rejected by established publishers, or never submitted to begin with. They have not struck oil and built a rig, they've built a rig and hope to strike oil.

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