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. I think Icahn
Carl Icahn didn't become a billionaire by making dumb mistakes, but his move to rattle the cage at Dell (UNKNOWN: DELL.DL  ) has all the makings of a disaster.

Dell received a $24.2 billion offer to take the company private last month, but Icahn feels that the buyout price of $13.65 a share is too low.

Simply being unhappy isn't enough for Icahn, obviously. He's an activist at heart, so he's taken a stake in the fading PC maker and threatening "years of litigation" if he doesn't get his way.

What's his plan? Well, no one has offered to top the $24.2 billion offer, but Icahn is proposing -- if the deal doesn't pass -- for Dell to pay a special dividend of $9 a share. Dell obviously doesn't have that kind of money, so it would have to take on new debt to make it happen.

Really?

Dell's behind the times, and it's too late in a world that has eased up on PCs over the past two years. Analysts see revenue slipping again this year, with profitability taking an even bigger hit. Taking on more debt is the last thing that Dell needs right now.

2. Fumbling away an opportunity
DIRECTV (NASDAQ: DTV  ) may not realize that its exclusive deal with the NFL to air every regular season game in its entirety is perhaps the only reason why it's able to command such a lofty premium over rival satellite television and most cable providers.

Speaking at Deutsche Bank Media, Internet & Telecom Conference in Florida this week, DIRECTV CFO Pat Doyle -- as retold in Hollywood Reporter -- said that the company is weighing changes to its NFL Sunday Ticket when it comes up for renewal.

The NFL is likely to command a princely ransom when the current deal expires in 2015, and Doyle said that the satellite television giant is considering striking a cheaper non-exclusive deal with the football league or dropping the package altogether.

Yikes. Maybe Doyle is merely negotiating in public, but at a time when live sports programming is about the only thing keeping many homes from cutting the cord with pay TV providers, it would be a devastating blow for DIRECTV to lose the one thing that sets it apart from everybody else.

3. Letting the bed bugs bite
In a week when the market was rallying to fresh all-time heights, shares of Select Comfort (NASDAQ: SCSS  ) hit a new 52-week low after posting a disappointing sales update.

The company behind the Sleep Number air-chambered mattress warned that sales have been soft since the beginning of last month. Unlike its beds, there's little that Select Comfort can do to adjust that firmness.

"We believe this is a short-term issue associated with accelerated changes made to our media-buying strategy, and we are making the necessary corrections to both media buying and near-term expenses," Select Comfort's CEO said.

You don't buy that? Well, Wall Street didn't buy it either.

Analysts didn't just take down this year's profit targets on Select Comfort. The average profit target for 2014 has now gone from $2.05 a share a week ago to $1.85 a share today.

Pleasant dreams, investors.

4. Skullcandy and cross bones
Skullcandy
(NASDAQ: SKUL  ) makes edgy headphones and earbuds, but now it's having a problem with the volume knob.

Skullcandy posted mixed quarterly results last night, but the real shocker came in its guidance.

The broken IPO -- shares have shed two-thirds of their value since going public at $20 two summers ago -- is only going to get uglier. Skullcandy expects to post a loss of $0.25 a share to $0.30 a share on a 30% drop in revenue. Analysts were holding out for a small profit on a 12% top-line pop.

Oops. The stock opened 17% lower this morning on the news

5. Goodbye, Tuesday Morning
Tuesday Morning (NASDAQ: TUES  ) runs a peculiar retail model.

The discounter gets its name from the lulls where it closes its stores to stock up on new wares, only to reopen again on a Tuesday morning. Apparently its CEOs also last about as long as one of the chain's selling cycles.

The retailer took a hit this week after announcing that CEO Brady Churches would be stepping down after just six months on the job.

I guess that gives the company a couple of weeks to introduce its next CEO, ideally early on a Tuesday morning.

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  • Report this Comment On March 09, 2013, at 10:23 PM, rsinj wrote:

    Re: SKUL

    Unfortunately, the dumbest move is by analysts, and journalists trying to pass themselves off as analysts who judge a stock/company by only considering how it will perform in the very next quarter. So they lose 25 or 30 cents in one quarter - this is the end of the world? The company just turned in their best quarter ever, has a current PE of 5, no debt, and 70 cents/share in cash on the balance sheet. Will a loss of 25 or 30 cents in a quarter during a seasonally slow period really going to affect them longer term? Hardly.

    At least one of your Fool colleagues was bragging to the world and patting himself on the back Wednesday because he picked the stock earlier in the week and was so proud of himself that the stock was up so much...clearly a result of all the Foolish authors here and Seeking Alpha pumping the stock in advance of the earnings. Maybe those Foolish people should be the subject of Dumbest Move of the Week?

    SKUL will end up just fine - for anyone who has a timeline of more than 90 days or 180 days which is hard to come by these days. If your field of view is only the next quarter, unfortunately in my book you don't qualify as an investor or an analyst worthy of having credit given your recommendations or articles.

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