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. Facebook doesn't see the big picture
Video ads are coming to Facebook (NASDAQ: FB  ) , according to marketing trade periodical AdAge.

The leading social networking website is apparently selling four different summer slots to four different demographic groups. The 15-second ads will reportedly run no more than three times per user on any given day, and Facebook is asking as much as $1 million a day for any of the slots.

Why are these spots so valuable? Well, AdAge is also reporting that the video ads will play automatically.

Uh-oh.

Facebook has upset its membership base with small tweaks in the past. Just imagine how irate they will be at having video ads jumping out at them the moment they check their newsfeeds.

The numbers are tantalizing. Facebook could make nearly $1.5 billion in annual revenue if it were to actually sell all of the daily slots at $1 million apiece. However, getting marketers to be the first to try this -- knowing that Facebook members will be upset enough to potentially boycott the sponsors, or at the very least spread the word on Facebook -- will be a hard sell for the site.

2. EA isn't always in the game
Electronic Arts (NASDAQ: EA  ) is about deny the friend requests of a lot of social gamers.

The game developer is announced that it will be shutting down three of its reasonably popular online games.

Even though Facebook claims that 5 million people were visiting The Sims Social every month -- and applications tracker AppData shows that the game was attracting 500,000 daily active users -- EA clearly feels that this isn't a large enough franchise to maintain.

This is a mistake. It may be true that social gaming is a hard business to monetize, but does EA realize that there are now millions of irate players that won't trust EA the next time it introduces a new virtual community?

3. Watch your step
Microsoft
(NASDAQ: MSFT  ) posted surprisingly robust financial results last night, but let's travel earlier into the week when rumors of a Microsoft smart watch surfaced.

Sources are telling The Wall Street Journal that the software giant is stockpiling supplies to make a push into the wearable computing market.

Really?

It's easy to fathom a high-tech wristwatch tethered to iOS or Android, but who wants a watch that interacts with a Surface tablet or a Lumia smartphone? Sure, there may be applications with Microsoft's market-leading Xbox console, but there probably isn't going to be a lot of demand for a Windows smart watch given the thin market share that the software giant has squared away in tablets and smartphones.

4. Finnish line
Speaking of Lumia, Nokia (NYSE: NOK  ) shares tumbled 11% yesterday after posting disappointing quarterly results.

The Finnish handset maker actually posted a narrower deficit than Wall Street was expecting, but revenue fell short of analyst forecasts.

Yes, Nokia did push out 5.6 million Windows-based Lumia smartphones. However, one has to wonder how many more handsets Nokia would be selling these days if it had turned down Microsoft's offer to champion the fledgling Windows Phone platform.

Nokia should've gone from Symbian to Android, but instead of being the next Samsung Nokia is just the latest company to pay the price for taking a big Microsoft check.

5. Hunting for a new auditor
Shares of Magnum Hunter Resources (NYSE: MHR  ) fell sharply after its auditor disclosed material weakness in internal controls.

Magnum Hunter did offer a remediation plan, but ultimately chose to dismiss PricewaterhouseCoopers, as the auditor was requesting additional information to fairly value its oil and gas assets.

You know the drill. Credibility takes a hit when a company switches auditors, especially when the departing firm voices concerns on the way out.

Get smart
You may have followed some losers this week, but there's always time to get it right the next time.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.


Read/Post Comments (3) | Recommend This Article (2)

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 20, 2013, at 8:14 PM, ctyank99 wrote:

    Nokia is going to do just fine... They actually has a lot of good news, Lumia sales were up 27% and they just started selling them... for the most part. The next two quarters will show much improved sales. Six months to a years from now, $3 a share will be a bargain! Buy, buy, but NOK!!!

  • Report this Comment On April 21, 2013, at 10:50 AM, brigidl wrote:

    The words "Stupid" and "Dumb" are very derogatory terms.

    In business and in investing you never make decisions with 100% of the information or facts (if you wait for 100% your already too late). Instead you make calls based on partial info, trends, adding the plus's and subtracting the minus's. Ask W.Buffet or P Lynch. This means you make mistakes, but it doesn't mean that its the end of the world.

    In business you make decisions based on hunches, some of which work out, some don't. The key thing about the most successful business is that they are always trying new things and keep what works. You have to keep trying. Trying new things is not failure, its not trying new things that is the recipe for failure. Some of the most successful discoveries, products and business lines were stumbled upon...but remember you can't stumble if your not going forward

  • Report this Comment On April 21, 2013, at 6:15 PM, 1caflash wrote:

    I am glad Rick wrote the article. I had high hopes for a preferred stock in which I was invested (GRH-C), but after reading a recent SEC filing, GreenHunter Energy is also having accounting problems and that is too dangerous for me, so it is not in my portfolio. Magnum Hunter's CEO also has a large interest in GRH, and although I wish investors in both companies well, I have turned my account over to a financial adviser I trust, who will help me gradually invest in less risky companies over a long time-period.

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