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
Longview

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.

Firstsolar

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.

You don't want to miss this
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And everyone from BMW to Nike to the U.S. Air Force is already using it every day. Watch The Motley Fool's shocking video presentation today to discover the garage gadget that's putting an end to the "Made in China" era, and learn the investing strategy we've used to double our money on these three stocks. Click here to watch now!

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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers