Monday'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 Monday.

Naughty?
Well, OK, we can't exactly call these stocks naughty. But none of them get much love from our 75,000-person-strong Motley Fool CAPS community of amateur and professional stock pickers.

To the contrary -- when it comes to these stocks, CAPS investors have gone thumbs-down more often than film critic Roger Ebert. They believe that none of these stocks are worth owning, and that some may be worth shorting.

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

Worse
We begin with Franklin Bank, which on Monday admitted that it would have to more than double its loan reserves, from 0.42% to 0.91% of its portfolio.

But this is happening with lots of banks, including former winner Downey Financial (NYSE:DSL). Why is Franklin different? Make sure you read all the way through the press release, Fool. Here's what you'll find at the end:

Franklin discovered that four loans related to one borrower totaling $13.5 million should have been categorized in the third quarter Form 10Q as troubled debt restructurings. [Emphasis added.]

One borrower ... four loans ... $13.5 million. Gone.

Um, guys? Anyone over at Franklin ever heard of due diligence?

Worser
Next up is Medivation, which took a hit after an analyst initiated coverage of the stock with a sell rating and -- get this -- a $5 price target, or roughly 66% lower than yesterday's close.

Talk about a brave call.

But is there really enough to go short on this emerging biotech? A history of capital destruction says yes:

Others simply see a nonsensical valuation. Here's how CAPS investor zzlangerhans put it in July:

Market cap currently overinflated based on positive phase II data for Dimebon. Alzheimer's, like cancer, has been a very difficult player to beat in phase III regardless of phase II performance. Stock price may bump short term on noise about phase III trial for Dimebon, but I expect downward trail within a year due to lack of new positive data and absence of other advanced compounds in pipeline.

The stock is down more than 25% since he made that call.

Worst
But our winner is, once again, Countrywide Financial. Why? The Wall Street Journal outed the bank for borrowing more than $50 billion from the Federal Home Loan Bank in Atlanta. A quasi-governmental institution, the FHLB was designed during the Depression era to prop up local banks, the Journal reports.

Now, apparently, these same banks -- or at least one branch of the network -- are being used to circumvent the credit markets, which, in theory, could circumvent the necessary process of repricing the risk associated with writing stupid loans. (At least Citigroup (NYSE:C) will pay 11% on its $7.5 billion bailout.)

But it gets worse. According to the Journal, the FHLB in Atlanta is one of 12 banks in a federally funded codependent network. Each bank is responsible for the FHLB's obligations.

That could become important. Here's why: Countrywide's rapidly degrading mortgage portfolio, put up as collateral, now accounts for roughly one-quarter of the $190.72 billion in assets that the FHLB branch in Atlanta holds.

See where I'm headed with this? Thanks to the FHLB and Countrywide, taxpayers face an even greater risk from the credit crunch than they did just a few months ago. Nothing new there, eh?

Countrywide and its how-about-we-let-the-taxpayers-bail-us-out management team ...  Monday's worst stock in the CAPS world.

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See you back here tomorrow for more stock horror stories.