This Week's 5 Dumbest Stock Moves

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Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. Let's take a look at five dumb financial events this week that may make your head spin.

1. Stand-up comedian stands down
You didn't get the Microsoft (Nasdaq: MSFT  ) ads, and the software giant gets it.

Microsoft is canning its Jerry Seinfeld ads that left more viewers scratching their heads than their chins. If Microsoft was trying to make the public forget about Vista's shortcomings as an operating system, it made the public painfully aware about Microsoft's shortcomings as a marketer.

2. Stop wearing purple
Speaking of questionable marketing calls, Yahoo! (Nasdaq: YHOO  ) is taking a stab at viral success with its Start Wearing Purple campaign, complete with its own stand-alone website as a tribute to all things purple (like Yahoo!'s logo).

So far, so good. So why did the move make this week's list? Well, the campaign centers around Gogol Bordello's Start Wearing Purple, a song about losing your wits and sanity in a carefree way as you age. I don't know if Yahoo! wants to cast itself in that light. Dino and Barney are purple dinosaurs. Can we expect The Flintstones theme music and Barney's I Love You kiddie show finale in the future? Let's hope that Yahoo! isn't the next purple dinosaur.

3. When you're here, you're family
(Nasdaq: TZOO  ) introduced a new CEO this week with Ralph Bartel handing the reins over to Holger Bartel. Ralph retains the chairmanship. Bartel to Bartel? Yes, Holger is Ralph's brother. To be fair, Holger headed up the company's North American operations for several years before this. However, after missing Wall Street estimates for seven quarters in a row, Ralph could have gone with a more dynamic outsider to get the market to rally behind the move.

I spoke to Ralph after the announcement, and he was upbeat about the company's growth prospects. Since he owns a sizeable enough voting stake in the company, he doesn't have to look over his shoulder for fear of being replaced. However, that alone isn't going to get Travelzoo's stock moving in the right direction. In an encouraging sign, both Bartels have been aggressively buying shares in the company this month. Unless a quiet privatization is in the works, let's hope Ralph's money is the smart money.

4. Naughty, naughty, Napster
Best Buy
(NYSE: BBY  ) is buying Napster (Nasdaq: NAPS  ) in a $121 million deal. That's not the dumb move. Best Buy is making a smart purchase here, giving it some skin in the digital music subscription game. It can market its products to Napster's more than 708,000 premium subscribers, rabid music fans who are willing to pay up for the aural smorgasbord. Best Buy's real world presence will also help boost the site's membership base.

No, the real dumb move goes to the bonehead investors who cashed out before the announcement. You can't catch them all, but why bail on Napster? It has produced five consecutive quarters of positive cash flow, yet was somehow trading for less than the cash on its balance sheet. Yes, Best Buy offered a huge premium to Napster's market price but really only has to shell out $53 million for the deal, because the balance comes from Napster's own net cash balance.

5. So much for the dollar menu
Money market funds are supposed to be conservative investments. Tell that to those who treated pioneer Primary Reserve as a high-yielding savings account. The company had to freeze redemptions as its otherwise steady $1.00 a share in Net Asset Value fell to $0.97 after taking a bath on some Lehman paper.

A 3% hit may not seem like much, but given the low short-term rates lately, that's what some of these funds will pay out all year. "Breaking the buck" has been a money fund taboo. It had only happened once before Primary Reserve's plunge.

This doesn't mean that other money market funds haven't come close. Financial giants like Wachovia (NYSE: WB) and Legg Mason (NYSE: LM) have had to fortify their funds to protect investors. There is too much at stake if you let a safe haven come undone, so they take the hit. It's not as easy to take the financial hit when all you do is run low-cost money market funds. How bad can the smear be? Let's count the number of Primary Reserve investors that stick around after the rubble clears.

Let's beat the Dumb Drum:

Microsoft, Legg Mason, and Best Buy are Motley Fool Inside Value recommendations. Best Buy is a Motley Fool Stock Advisor selection. The Fool owns shares of Legg Mason and Best Buy. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. Hdoes not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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10/26/2016 4:00 PM
MSFT $60.63 Down -0.36 -0.59%
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NAPS $2.64 Down +0.00 +0.00%
TZOO $10.90 Down -1.20 -9.92%
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