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Thursday'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 Thursday.


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Select Comfort (NASDAQ:SCSS)





Idearc (NYSE:IAR)





Spectrum Brands (NYSE:SPC)





O'Charley's (NASDAQ:CHUX)





Infineon (NYSE:IFX)





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

Well, OK, we can't exactly call these stocks naughty. There are days when five-star winners and newsletter recommendations appear here.

But if you're an investor, you'll have plenty of bad days. The trick is to avoid dating -- or, worse, marrying -- your losers. That's why I listen when our 83,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should, too.

Thus, here is today's list of the worst stocks in the world.

We begin with Idearc, a yellow-pages provider that's also a spinoff from Verizon (NYSE: VZ  ) . The company reported a 1% decline in overall revenue.

Management pointed to a 24% gain on the top line for its Internet business. Trouble is, that unit was responsible for just 9% of overall revenue during 2007.

And it's not as if this fast-growing unit will forestall further losses. Quoting from a company statement:

From a financial perspective, Idearc expects slightly lower amortized multi-product revenues, primarily due to economic softness in the second half of 2007 continuing into the first half of 2008. The Company also expects some operating margin contraction, due to the continued transformation of the business and associated changes in the revenue mix. [Emphasis added.]

Lower revenue. Contracting margins. Sounds just dandy, doesn't it?

Next up is Select Comfort, which once again left investors wanting when it announced an 80% year-over-year drop in fourth-quarter profits. Ouch.

But this is more than a one-quarter story. Cash from operations has fallen consistently since 2005. Capital expenditures, over the same period, have nearly doubled. Free cash flow fell to a barely noticeable $517,000 in 2007, from more than $28 million in the year prior.

At some point, management's promised overhauls of existing stores and Select Comfort's product mix must result in higher cash flows. So far, they haven't, which makes me wonder whether Select Comfort simply lacks the management talent it needs to turn this business around.

Fellow Fool Rick Munarriz might have said it best in December: "In a bold move, Select Comfort will increase prices on a few models next month. With year-over-year sales falling and store-level comps plummeting even more, stirring up sticker shock seems like a losing strategy."

If only someone had been listening.

But our winner is O'Charley's, which reported declines in same-store sales for all of its chains during the fourth quarter and full year. Worse yet, a litany of one-time charges -- totaling $0.09 in earnings per share -- torpedoed net profit, which fell more than 86% on a GAAP basis.

Hang on -- we're not done. After excluding those charges, the $0.12 per-share fourth-quarter performance at O'Charley's was well below the $0.22 showing it had in Q4 2006.

I should be fair here and point out that last year's Q4 included an extra week. But do you really believe O'Charley's would have earned a dime more per share had it been blessed with an extra week? Yeah, I don't, either.

As CAPS All-Star jmacn22 presciently put it in August 2006:

The company is introducing some new menu items in the second half of the year, which should help drive customer traffic. But there doesn't seem to be enough revolutionary changes in its RevO'lution plan to compel customers to come back in droves. O'Charley's has been a traditional underperformer and I don't see that changing anytime soon.

Translation: Don't be surprised if O'Charley's, like Ruby Tuesday (NYSE: RT  ) , becomes a regular guest in this column.

O'Charley's and its where's-the-luck-of-the-Irish-when-we-need-it business model ... Thursday's worst stocks 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.

I'll be back next week with more stock horror stories.

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12/31/1969 7:00 PM
CHUX.DL $0.00 Down +0.00 +0.00%
O'Charley's, Inc. CAPS Rating: **
IAR $0.02 Down +0.00 +0.00%
Idearc CAPS Rating: ***
SCSS $19.06 Up +0.07 +0.37%
Select Comfort CAPS Rating: *****
IFX.DL $0.00 Down +0.00 +0.00%
Infineon Technolog… CAPS Rating: **
SPC.DL $0.00 Down +0.00 +0.00%
Spectrum Brands, I… CAPS Rating: *
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