This Week's 5 Dumbest Stock Moves

These five companies got it wrong this week.

Jan 10, 2014 at 4:46PM

Stupidity is contagious -- even respectable companies can catch it. As we do every week, let's take a look at five dumb financial events this week that may make your head spin.

1. Penney for your thoughts
J.C. Penney (NYSE:JCP) shares tumbled 10% on Wednesday after the company reported that it's happy with its turnaround initiatives.

If that seems to be a peculiar move in light of the struggling department store chain's optimism, it's really a matter of what it didn't say.

"The company is pleased with its performance for the holiday period, showing continued progress in its turnaround efforts," J.C. Penney offered up.

That was pretty much it. There were no hard metrics on its performance like there were a month earlier when it was bragging about a 10.1% spike in November comps. Then again, with comps plummeting 31.7% during the prior year's holiday quarter, it's not as if the bar was set high. By sidestepping its December performance investors are left to their own imagination in conjuring how bad the telltale holiday shopping season went.

Yes, J.C. Penney is sticking to its earlier guidance of positive comps for the entire quarter ending later this month. However, November was a big month for the retailer -- it could close out the quarter with positive comps even if December and January turn out to be negative.

2. Here's a Nook knock joke
The ghost of Borders isn't laughing, but it seems as if Barnes & Noble's (NYSE:BKS) plan to survive the digital age is running dry on virtual ink.

Barnes & Noble posted its results for the nine-week holiday period. The superstore is holding up fairly well, with comps for its non-Nook products down a mere 0.2% during the critical holiday shopping season.

The news isn't as kind on the Nook front, where sales continue to plummet. Device and accessory sales plunged 66.7%. The drop isn't a surprise: Barnes & Noble didn't even put out a new tablet in 2013. However, it has to be a shock to see digital content sales fall 27.3% to account for just 3% of Barnes & Noble's total sales.

The cumulative number of Nook products increases with every quarter, yet digital sales continue to drop? This story won't end well.

3. GameStop lives up to its name
Outside of Michael Bay, who panicked during a Samsung presentation when the teleprompter malfunctioned, there weren't too many losers at this week's CES. 

However, one company's announcement did cause shares of GameStop (NYSE:GME) to tumble 8% on Tuesday. Sony introduced PlayStation Now at CES, and the streaming gaming service is naturally bad news for GameStop if it takes off. We're talking about diehard PlayStation gamers who won't need to purchase games on optical discs, and no more used games to trade in. That last point is huge, since GameStop's biggest margins lie in its resale of preowned games and gear. 

GameStop investors have always known that they are buying into a transitory retailer. The stock soared last year as the success of new consoles delayed its demise, but the fade is inevitable. PlayStation Now is just another reminder that gaming is going direct and digital.

4. Apple's original sin
Analysts have downgraded Apple (NASDAQ:AAPL) because its margins have contracted over the past year, but now there's one Wall Street pro knocking the consumer tech bellwether because its margins are too high.

Standpoint Research's Ronnie Moas downgraded Apple as an investment on ethical grounds, arguing that it should be paying employees more to assemble its products. Moas is talking about Apple's relationship with China's Foxconn, the contract manufacturer that pieces together many of Apple's products, where employees reportedly get paid roughly $2 an hour. 

It's a call that doesn't make sense. There's definitely a place for socially responsible investing, but when an analyst issues a sell rating based on social recommendations that would shrink a company's already challenged profitability level it's a disservice all around.

5. Letting the air out of the mattress
Once again we find Select Comfort (NASDAQ:SCSS) coming up short.

The company behind the air-chambered Sleep Number beds that provide adjustable firmness settings warned that its holiday sales fell short of earlier expectations. Select Comfort is warning that comps were flat. Its mid-November guidance was based on profit projections with comps rising in the mid-single digits.It's naturally going to fall short now.

Investors should be used to this by now. Select Comfort has missed Wall Street's profit targets in each of the past four quarters. It's a predictable sleeping pattern.

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Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, Barnes & Noble, and GameStop. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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