Why Lorillard, Inc., Diamond Offshore Drilling Inc., and Transocean Ltd. Are Today's 3 Worst Stocks

From tobacco to oil production, these companies had a rough go of it in the stock market today

Jun 2, 2014 at 7:14PM

The S&P 500 Index (SNPINDEX:^GSPC) finished higher for a sixth time in the last seven days, reaching yet another all-time closing record on Monday. Six out of 10 sectors finished higher as manufacturing data in the U.S. and China reassured investors that the global economic recovery isn't in danger of ending anytime soon. Shareholders invested in Lorillard, (NYSE:LO), Diamond Offshore Drilling (NYSE:DO), and Transocean Ltd. (NYSE:RIG) didn't get the memo, however, as each stock ended near the bottom of the S&P today.

Tobacco giant Lorillard shed 2.6% today, as the recent gains enjoyed by investors are showing signs of eroding. Lorillard is at the center of acquisition rumors, as Reynolds American is thought to be mulling a bid for the largest U.S. cigarette maker. At this point, each day that passes without a firm offer from Reynolds threatens to send the stock lower, since an acquisition would almost certainly entail a sizable premium to today's market value. As recently as Sunday, Wells Fargo thought a deal was highly probable, so don't write it off just yet.

The final two laggards of the day both hail from the same industry: offshore oil drillers. Shares of Diamond Offshore Drilling, for instance, slumped 2.3% Monday. Contract drillers like Diamond Offshore make their bread-and-butter on the "day rates" they charge oil producers to make use of their rigs. The rate that producers have been willing to pay has been declining recently, and until that trend reverses, the economics of Diamond Offshore's business look risky at best.


Source: Transocean.

Fellow contract driller Transocean also lost the popularity contest on Wall Street today, slumping 2.1%. While both Transocean and Diamond Offshore felt industry-related pushback from investors Monday, let's keep in mind that these are indeed two separate companies with two different investment profiles. One of the major reasons Transocean looks attractive at current levels is the stock's whopping 7.1% annual dividend, a substantial income guarantee that Transocean can easily afford to pay. And unless day rates take a sudden, precipitous decline, that robust dividend should remain realistic.

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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 Wells Fargo. The Motley Fool owns shares of Transocean and Wells Fargo and has options on Wells Fargo. 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.

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. 

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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." 

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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