Friday's Worst Stocks in the World

Bad days. We all have them; some of us deserve them.

Here are five stocks whose naughty ways drew investors' scorn on Friday:

Company

Closing Price

CAPS Rating
(5 max)

%
Change

52-Week
Range

BankAtlantic Bancorp (NYSE:BBX)

$4.72

*

(38.30%)

$4.05-$14.00

WellCare Health Plans (NYSE:WCG)

$31.36

**

(26.51%)

$27.50-$128.42

Clayton Holdings (NASDAQ:CLAY)

$5.48

*

(21.94%)

$5.07-$24.30

ValueVision (NASDAQ:VVTV)

$5.35

*

(17.18%)

$5.25-$14.12

BFC Financial (NYSE:BFF)

$2.32

**

(14.07%)

$2.11-$7.06

Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.

Naughty?
Well, OK, we can't exactly call these stocks naughty. But none of them get much love from our 70,000-person-strong Motley Fool CAPS community of amateur and professional stock pickers.

When it comes to these stocks, CAPS investors have gone thumbs-down more often than film critic Roger Ebert. They don't believe any of these stocks are worth owning, and that some may be worth shorting.

Which of today's candidates is the worst? Read on, dear Fool.

Worse
We begin with BankAtlantic Bancorp, which on Friday was downgraded by Wall Street's Friedman Billings Ramsey. And for good reason: BankAtlantic is heavily dependent on the rapidly deteriorating residential real estate market in Florida.

Or at least that's how CEO Alan Levan put it to news agency Reuters. Quoting:

We do not anticipate that market conditions will improve in the near-term and expect that the negative factors impacting this quarter's results may continue to affect us in the fourth quarter and into 2008.

Oh, goody.

Not that you needed this catalyst to see where BankAtlantic was headed. For years, returns on assets and equity have been lagging like a smoker in the Marine Corps Marathon:

Metrics

TTM*

2006

2005

2004

Return on assets

(0.3%)

0.4%

0.7%

1.0%

Return on equity

(3.8%)

5.2%

8.6%

12.1%

Source: Capital IQ, a division of Standard & Poor's.
* Trailing 12 months

Worser
Next up is WellCare Health Plans, which is being stalked by regulators similar to the way the paparazzi can't get enough of Paris and Britney.

It could be months before we know whether WellCare's top brass have been caught in equally uncompromising poses. But if there's a scandal to unearth, it's a good bet it'll be found. Both the SEC and the attorney general of Connecticut are probing WellCare. The FBI raided the company's Florida headquarters on Thursday. And a large investor has filed suit, alleging fraud.

So far, WellCare isn't saying much -- only that none of its executives have been charged with a crime. Uh-huh. And the FBI plans raids when it has nothing else to do.

Worst
But our winner is Clayton Holdings, which specializes in performing due diligence for those who buy, sell, and otherwise have an interest in securitized loans. It fell just short of Street expectations in reporting earnings last week.

And when I say "just short," I mean "tossed up an air ball from 30 feet." Clayton booked a $0.05-per-share loss after excluding special items. Analysts were looking for at least a $0.01 in non-GAAP profit.

But that's not why Clayton leads today's list of losers. This quote from CEO Frank Filipps, given in the earnings release, is.

The unprecedented credit crisis that unfolded in the third quarter caused a dramatic downturn in the nonconforming securitization market and significantly reduced our transaction management volumes. Such volumes may not increase materially until investor confidence and liquidity return to the asset-backed market. [Emphasis added.]

Translation: "Yeah, the market stinks. It'd be better if investors stopped being so darn negative."

As if investors don't have a right to be negative? Puh-leeze. Clayton's business is due diligence, for goodness' sake. Are you telling me, Mr. Filipps, that institutional buyers and sellers shouldn't be more skeptical of subprime loans today than they were yesterday?

I'd be more forgiving if Clayton weren't profiting from investors who chose to ignore whatever subprime warnings it passed along. Now that they are paying attention, there's less transaction revenue to be had, which means lower earnings for Clayton.

Surely there's a need for third-party due diligence when it comes to the risky business of securitizing loans. But wouldn't it be best if those charged with the task of performing such diligence profited most when they protect their clients?

Clayton Holdings and its chin-up gang in the boardroom ... Friday's worst stock in the CAPS world.

Do you agree? Disagree? Let us know what you think by signing up for CAPS today. It's 100% free to participate.

Come back tomorrow for more stock horror stories.


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