Why Whole Foods Market, Yahoo!, and First Solar Are Today's 3 Worst Stocks

Two of Wednesday's laggards fell off a cliff despite ostensibly good news, while the steepest decliner in the stock market today faces serious long-term issues

May 7, 2014 at 8:08PM

Stocks rebounded from yesterday's stumble today, advancing on Federal Reserve Chairwoman Janet Yellen's firm but vague vows to keep interest rates at historical lows. How was she firm, yet vague, simultaneously? She was unwavering in her conviction that rates should remain low, but absolutely noncommittal when pressed on how long those policies should continue. Though she caught some flak for being evasive, monetary policy would cease to be effective if it were precisely choreographed ages in advance. Though Wall Street received Yellen's remarks well, it cringed at the sight of Whole Foods Market (NASDAQ:WFM), Yahoo! (NASDAQ:YHOO), and First Solar (NASDAQ:FSLR) today, and each stock finished near the bottom of the S&P 500 Index (SNPINDEX:^GSPC). The S&P, for its part, added 10 points, or 0.6%, to end at 1,878.

Whole Foods Market was far and away the most abject laggard in the index, plunging 18.8% after its quarterly report. Both sales and net income in the period came in below expectations, and to compound the pain, the grocer also cut its earnings forecast for the year! Not only is the writing on the wall in terms of Whole Foods' same-store sales slowdown, but CEO John Mackey's candid views about the competitive environment were also revealing. Saying that the company's niche had "gone mainstream," and that rivals doing "what we're doing" were springing up left and right, it's tough to see the business' long-term competitive advantage. 

Shares of Yahoo! stumbled 6.6% on Wednesday, even as investors digested news of a windfall in the form of Chinese e-commerce giant Alibaba's IPO plans. Yahoo! did investors the service of a lifetime in 2005 when it snatched up 40% of the Emerging Alibaba Group for $1 billion in 2005. Since then Alibaba has grown explosively, and Yahoo!'s stake, even after taking some eye-popping gains along the way, is worth an estimated $26 billion. With Alibaba announcing plans to go public sometime this fall, Yahoo! will be forced to sell about 40% of its stake, putting the onus on the search company to generate growth of its own with the new funds.


Source: First Solar website

I expect that the endless quarter-to-quarter management of Wall Street expectations has grayed more than one executive's mane. But sometimes the inanity of the market's short-term focus can make you, the bystander, want to rip your hair from its roots -- an uncomfortable emotion that I myself experienced upon glimpsing First Solar's slide today. While First Solar is a market leader in the rapidly emerging field of solar power panels; and while the stock trades at a reasonable multiple; and while the company nearly doubled first quarter earnings forecasts, second quarter earnings projections weren't up to snuff for Wall Street. As a result, First Solar stock shed 5.8% Wednesday, even though the company increased its full-year EPS, operating income, and cash flow guidance. The good news: ardent believers in the company's long-term success can always take the contrarian view -- and tell Mr. Market to shove it where the sun don't shine.

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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors.

John Divine has no position in any stocks mentioned. You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool recommends BMW, Nike, Whole Foods Market, and Yahoo! and owns shares of Nike and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. 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.

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.

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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. 

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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." 

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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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