Tuesday'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 Tuesday:

Naughty?
Well, OK, we can't exactly call these stocks naughty. We've had stocks that rate four, and even five, Motley Fool CAPS stars in this column in the not-too-distant past and have another today.

But, as Huey Lewis says, "Bad is bad." And when our 82,000-person-strong Motley Fool CAPS community of amateur and professional stock pickers chimes in with a poor rating or a negative pitch, I listen. You should too.

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

Worse
We begin with Smith & Wesson, which told investors that it would suspend its practice of providing guidance until further notice. Quoting CEO Michael Golden from a press release issued yesterday morning:

We remain firmly convinced that our established strategy to grow our core firearms business and to continue to look for opportunities to diversify the company into new areas of safety, security, protection, and sport is the correct strategy. What has changed, and it has changed profoundly, is the fact that the current business and economic environments are extremely unsettled. [Emphasis added.]

I commend Golden for being forthright. What I don't like is how quickly the business fell apart. Smith & Wesson last gave guidance on Dec. 6, when we knew most of what we know today about the subprime crisis and the ensuing credit crunch. I'm thus forced to conclude that there's more than a poor macroeconomic environment at work at Smith & Wesson.

Worser
Next up is Corinthian Colleges, which admitted in an SEC filing that a number of its students obtained subprime loans to attend its institutions. Quoting from the 8-K:

Sallie Mae provided 90% of private loans for Corinthian's students in the United States. Private loans constituted approximately 13% of our U.S. revenue (on a cash basis) in fiscal 2007. On January 18, 2008, we received a letter from Sallie Mae indicating that it was exiting the subprime lending business for private student loans. Thus, effective March 1, 2008, Sallie Mae will no longer provide private loans for Corinthian students in the subprime credit category. In fiscal 2007, approximately 75% of our private loan portfolio was subprime. [Emphasis added.]

Translation: Roughly 10% of our revenue -- 75% of 13% is 9.75% -- is now at risk. Sorry about that.

Worst
But our winner is ITT Educational Services, which announced new funding options for students with the aid of Bank of America (NYSE: BAC) and Citigroup (NYSE: C), among others. CEO Kevin Modany put the strategy in perspective in a statement: "We strongly believe that no qualified individual should ever be denied access to the education of his or her choice due to a lack of funds."

Notice the language. Modany is implying that, without additional funding from these lenders, students won't have access to the education ITT Technical Institute offers. Which, in turn, suggests that ITT sees its business coming under pressure.

CAPS investors can't claim to be surprised. Here's how Atkinson501, an ITT student, put it in pitching against the stock last May:

I am graduating from here, and as a graduating student I can tell you this stock is way overpriced. It will fall, and fall hard. The management system is horrible, they have a tough time retaining good, solid instructors because of issues with pay and benefits, and as such are losing their best instructors to their direct competition: DeVry, University of Phoenix, etc.

Former ITT professor and CAPS All-Star avalon02 agreed, and added perspective, in October, saying:

I was an instructor at ITT Tech (1998-2000). You're right about the pay issue. My impression was that too many students were pushed through the program without earning the grades. This, to me, was an injustice to the students.

ITT Educational Services and its in-need-of-more-than-a-patch-job business model ... Tuesday'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.

I'll be back tomorrow with more stock horror stories.