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. Some companies are better off headless
Shares of Best Buy (NYSE: BBY  ) fell on Monday after the company announced that former Carlson leader Hubert Joly will be the struggling consumer electronics retailer's new CEO.

It's not that investors don't like Joly. Just about any name handed the keys to the CEO office at Best Buy would've been poorly received by the market.

What was Best Buy thinking here? The company's founder has been trying to make a bid to take the company private this summer. Adding a CEO -- with what is likely a cushy pay package including a sparkling golden parachute -- will only make any potential buyer pay less for Best Buy.

Bulls will argue that this is the company's strongest indication yet that it believes that it can turn things around on its own, but it crushes the buyout premium in the stock. In short, it's definitely not a shareholder-friendly move. When you consider that his compensation package is a head-shaking $32 million over the years -- not including a mind-boggling $6.25 million check if the French citizen isn't able to obtain a work visa next month -- and you're starting to sense that karma's going to get the last laugh at Best Buy.

2. It's not butter -- it's margin
ZAGG (Nasdaq: ZAGG  ) is on the hunt for a new CEO.

Robert Pedersen resigned over the weekend after a margin call forced him to sell $4.2 million worth of his company's stock.

ZAGG makes the "dumb" list this week for a couple of reasons, even though the events leading up to this Monday's plunge took place last week.

For starters, ZAGG adopted a policy prohibiting this behavior last Thursday, two days after Pedersen was forced into this stock sale. The maker of smartphone and tablet accessories also waited until Friday night to issue the news.

Really? Do companies think investors suffer from amnesia over the weekend? ZAGG's stock tanked on Monday.

3. You're not getting a Dell, dude
Given the global slump in PC sales, no one expected Dell (Nasdaq: DELL  ) to post a strong quarter.

The market was settling for bad quarterly results on Tuesday, but the report was even uglier than Wall Street's bleak view of the fading box maker.

Dell's 8% decline in revenue -- bogged down by a 14% plunge in PC sales -- was uglier than the top-line decline of 6% that analysts were forecasting.

Dell's outlook was even worse. The once enviously iconic tech giant sees revenue sliding 2% to 5% sequentially during the current quarter, earning "at least" $1.70 a share for the entire fiscal year. Even the pessimistic pros were eyeing sequential revenue growth and a profit closer to $1.95 a share this year.

4. Making lemons out of lemonade
Green Mountain Coffee Roasters (Nasdaq: GMCR  ) wants consumers to know that its Keurig brewers aren't just about java.

The latest line in the Green Mountain Naturals line is lemonade. Consumers insert the K-Cup in the brewer, fill a cup up with ice, and out comes six to eight ounces of all-natural lemonade.

This is a brilliant idea on some levels. It widens the gamut of beverage offerings that the brewer can make. It helps smoothen out the seasonality of its warm cocoa and apple cider K-Cups that thrive in cold weather. However, Green Mountain also comes up short on a few points here.

  • The timing could be better. Summer is two-thirds over, and many area schools are starting up their new school years. Wouldn't it have been possible to introduce lemonade two months earlier?
  • It's not cheap. A 24-pack of the lemonade K-Cups retails for $17.49. Paying $0.73 for six to eight ounces of lemonade doesn't sound so compelling. That pricing works for premium coffee, but not for a simple beverage that sells for far less in full cans.
  • The Brew Over Ice line has helped Green Mountain push iced coffee and other drinks, but the act of pouring a hot beverage over crackling ice means that customers can't use cups made of glass. Really? A glass-less glass of lemonade?

5. Here I dreamt I was an architect
Autodesk
(Nasdaq: ADSK  ) is one of Friday's biggest losers after posting crummy quarterly results.

The provider of 3-D design, engineering, and entertainment software saw its revenue climb 4% to $568.7 million, less than half the growth that analysts were banking on. Autodesk's adjusted profit of $0.48 a share just missed the $0.49 a share that Wall Street was targeting.

Taking a page out of Dell's script, guidance for the current quarter is even uglier. Autodesk's guidance implies that sequential declines on the top and bottom lines will probably happen. The pros were betting on improvement.

Some blueprints are just blue.

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The Motley Fool owns shares of Best Buy and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended buying shares of Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Green Mountain. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (3) | Recommend This Article (6)

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  • Report this Comment On August 24, 2012, at 12:18 PM, dwscho wrote:

    Not only was the Best Buy decision to hire a new CEO premature given the potential for a buyout, but it also came with a $6.25 million payout if the new CEO can't get a green card. Do you mean to say that in the whole US, there isn't a qulaified CEO candidate for Best Buy? You have to be kidding!

  • Report this Comment On August 26, 2012, at 8:02 PM, TruffelPig wrote:

    I think the dumbest move this week was BIDU - just because Qihu 360 rumor the stock tanks from 130 to 110........nothing really has changed in the growth story. Also, BIDU is getting into the travel business and THAT is good news!

  • Report this Comment On August 27, 2012, at 2:29 AM, Risky88 wrote:

    If you ask me

    if BBY wants to turn the company around

    They probably need to

    LISTEN to people who are actually out on the floor!

    JCP probably does too!

    Every time I'v ever been hired for a job they talk about how great they are at cutting costs.

    When you actually see how the company operates, its pretty much the exact opposite.

    Not too mention the people on the floor

    are the ones who buy products because they're part of the consumer nation as a whole! who knew!

    Survival of the fittest!

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