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. Frank LINN
LINN Energy
(NASDAQ: LINE  ) took a hit after revealing that the SEC is launching an inquiry into the company's hedging strategies, accounting metrics, and the proposed purchase of Berry Petroleum.

LINN's been a serial acquirer. It's been snapping up smaller oil and natural gas providers in this highly fragmented sector. LINN racked up $2.9 billion in purchases last year alone and the Berry deal would put it well above that in 2013.

Accounting can get tricky as companies go on buying sprees, but investors tend to steer clear once regulators start launching investigations.

The silver lining for daring income chasers is that LINN's yield just got ridiculously juicy. It declared a monthly cash distribution this week that translates into an annualized yield of 12.7% on the units based on Wednesday's close.

The fear here, naturally, is that the payouts on the units won't be sustainable if the SEC's inquiry nails LINN.

2. Brake fast at Tiffany's
You don't often see too many company executives doubling as jewel thieves, but that's just what reportedly happened at Tiffany (NYSE: TIF  ) .

Ingrid Lederhaas-Okun -- a vice president at the upscale retailer until being dismissed in a corporate downsizing earlier this year -- was arrested and charged with stealing more than 165 pieces of jewelry valued at more than $1.2 million.

The thefts reportedly took place during the four months leading to her dismissal. She then went on to sell the jewelry.

Given that Tiffany is a high-end jewelry retailer, one would think that it should have caught this sooner.

3. A penne for your thoughts
Noodles & Co.
(NASDAQ: NDLS  ) has become an IPO sensation, soaring 165% since going public at $17 a week ago.

This is naturally good news for the health of the IPO market and a testament to the popularity of fast casual dining, but investors calling this the second coming of Chipotle Mexican Grill may want to revisit their assessments.

Noodles closed at $45 on Wednesday, which happens to be exactly where Chipotle opened on its first trade after more than doubling at the open more than seven years ago.

Let's frame this comparison by pitting Chipotle at $45 in early 2006 and Noodles at $45 today.

Metric 

Noodles & Co.

Chipotle

Market cap

$1.3 billion

$1.4 billion

Prior-year revenue

$300.4 million

$627.7 million

Revenue growth

17%

33%

Units when year began

276

489

Prior-year comps

10.2%

5.4%

Sources: Chipotle 2005 Annual Report and Noodles & Co. Prospectus.

So let's get this straight. Chipotle and Noodles carried similar valuations of $1.3 billion to $1.4 billion yet Chipotle was twice as big, growing twice as fast, and store-level comps were also growing twice as quickly.

Noodles is an impressive company, and it should evolve well over time, but the run in its first four days of public trading is not justified given the fundamentals.

4. Boston IP party
Apple
(NASDAQ: AAPL  ) can't seem to catch a break these days.

Boston University is suing the consumer tech giant, alleging that Apple's key products violate a 1997 patent held by the school.

The patent for highly insulating monocrystaline gallium nitride thin films could potentially halt the sale of iPhone 5 smartphones, iPad tablets, and Macbook Air laptops.

Naturally the suit is unlikely to get that far, even if it has merit.

Either way, given the stagnancy at Apple these days, where revenue growth has been flat and profitability has been declining, the last thing that the Cupertino bellwether needs is more uncertainty.

5. You can't spell Baidu without B-A-D
It isn't easy being a CEO these days, as the public can turn on you as quickly as they do on NBA coaches.

Baidu's (NASDAQ: BIDU  ) Robin Li -- a rock star in China and one of its wealthiest citizens -- has fallen a long way over the past year.

Li was on top of Forbes annual list of the country's top CEOs a year ago, but this time he fell all the way down to No. 40.

To be fair, the survey ranks CEO performance relative to compensation. It's hard to stay on top when your stock tumbles more than 20% over the past year. However, it's still a long way down for the guy running a company that until this past summer was the dot-com darling of the world's most populous nation.

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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 July 05, 2013, at 11:33 PM, Awebb30 wrote:

    Too funny...another Fool article comparing Noodles to Chipotle. I can't remember when Noodles said that they were the same as Chipotle, but alas, it seems to be the theme at your blog. Oh well, 2 years from now when David or Tom recommend Noodles stock, perhaps the hate will subside? We shall see.

  • Report this Comment On July 06, 2013, at 8:25 PM, jad9000 wrote:

    Linn has been using the same accounting as any company that hedges, including any multinational (currency), commodities company (agriculture, minerals, gold/silver), food companies, energy companies, etc. They have been given a clean bill for a decade. What we have here is a bear raid by a piddly "research" company, an "analyst" that is an economist and not a CPA and a bunch of their hedge fund cronies. When the SEC is finished with their informal inquiry they will hopefully head over to have a few words with the culprits listed above. And, I hope Linn sues the pants off of them.

  • Report this Comment On July 07, 2013, at 1:01 PM, riwaterman wrote:

    "Either way, given the stagnancy at Apple these days, where revenue growth has been flat and profitability has been declining, the last thing that the Cupertino bellwether needs is more uncertainty."

    Uncertainty based on the Boston University lawsuit?

    Get real! This lawsuit could have very minimal on Apple even if it went to trial and Apple loses it all. Not much exposure here. Probably be settled for an undisclosed amount if there is any merit.

    The biggest uncertainty Apple faces is what records will be broken in the fourth quarter of this year when its new products are all released in that Quarter or the previous one.

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