This Week's 5 Dumbest Stock Moves

These five companies got it wrong this week.

May 30, 2014 at 5:17PM

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. In space, no one can hear your stream 
Western Digital (NASDAQ:WDC) updated its set-top streaming player, but there's a surprising omission in the new WD TV player. It plays all of the popular file formats, and being made by a hard drive giant, it will naturally play nice with various sources, including networked computers. However, in a shocking move, it won't support Netflix.

Really, Western Digital? The WD TV is more about playing back your own files, but you can't expect people to buy a set-top box for $100 that doesn't seamlessly stream the leading premium video service. Netflix has 35.7 million subscribers in this country and another 12.7 million members overseas. The worldwide figure grows by the millions with every passing quarter. If Western Digital thinks Netflix isn't important, it's missing the point. If features of the WD TV make it difficult to support Netflix, then those features probably aren't as important as Western Digital thinks.

2. You can't spell Costco without C-O-S-T
Buying in bulk remains fiscally fashionable. Costco's (NASDAQ:COST) sales climbed 7% in its latest quarter, fueled by a 5% uptick in comps. That's nice to see, especially with many discounters chiming in with negative same-store sales lately. However, Costco will get no love for seeing its earnings climb at half that pace to clock in at $1.07 a share. Analysts were holding out for a profit of $1.09 a share.

This wouldn't be such a big deal if it were a rare miss, but that is just not the case. Costco has come up short of Wall Street's profit expectations for four consecutive quarters. It gets plenty of praise for its lean operations and employee satisfaction, but something just isn't right if analysts keep overestimating the warehouse club's earnings potential. 

3. Sea the difference 
I took SeaWorld Entertainment (NYSE:SEAS) to task last week for increasing the prices of its one-day tickets to Sea World Orlando and Busch Gardens Tampa. The 3% increase -- up to a freakishly steep $95 -- didn't make sense in light of sluggish attendance. Turnstile clicks declined 4% last year and plunged 13% during this year's first quarter. Raising admission prices after four consecutive quarters of falling attendance didn't seem like a very smart move.

A caveat in all of this was that a major thrill ride was opening at Busch Gardens Tampa. Unfortunately, the Falcon's Fury drop ride has yet to open. Despite the media event several weeks ago and promotional material throughout Tampa claiming that the ride is open, the theme park operator has run into a few snags. This week, it updated the ride's opening to "later this summer" in a move that will likely eat into attendance through June and possibly eat into the next quarter.  

4. You need to earn that ticker symbol
You don't often see Southwest Airlines (NYSE:LUV) on the wrong end of a deceptive marketing accusation, but that's what happened this week when the low-cost carrier was fined $200,000 for advertising $59 fares for certain routes late last year that never really existed. 

Southwest is usually the one calling out the competition for hidden fees. Its "bags fly free" ad campaign takes its airborne rivals to task for not charging what passengers think they will be paying. Whether Southwest is a hypocrite or this was just an honest mistake, it still doesn't look very flattering.

5. Ford tough
It's been a rough year for automakers in terms of having to fix past mistakes, and this week it was Ford (NYSE:F) announcing several recalls totaling nearly 1.4 million cars being called back to remedy defects.

The biggest issue involves 915,000 Ford Escape and Mercury Mariner cars with a potential issue where the torque sensor in the steering column can result in a loss of electric power steering assist. Recalls naturally cover all cars for unlikely scenarios, but it certainly does rough up an automaker's reputation to have to bring cars into service centers for something it should've gotten right the first time.

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Rick Munarriz owns shares of Ford and Netflix. The Motley Fool recommends and owns shares of Costco Wholesale, Ford, and Netflix. It owns shares of Western Digital. 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.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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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