Wednesday'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 Wednesday:

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

Naughty?
Well, OK, we can't exactly call these stocks naughty. There are days when five-star winners and newsletter recommendations appear here. Today, sadly, is one of those days.

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 105,000-person-strong Motley Fool CAPS community of stock pickers speaks with a poor rating or a negative pitch. You should listen, too.

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

Worse
We begin with Moody's, which, according to an article in Europe's Financial Times, made serious errors in rating $4 billion worth of foreign debt.

Frankly, I'd rather not see Moody's on this list. The stock has been a winner for both Inside Value and Stock Advisor and, I think, remains a vital and well-positioned business. No lesser than Warren Buffett feels similarly.

What I can't get past is that, according to the FT's reporting, documents show management knew of the error early last year. True or not -- we won't know till an outside law firm completes an investigation -- expect the ambulance chasers to pounce.

Worser
Next up is Tween Brands, a former guest in this column that on Wednesday reported better-than-expected first-quarter sales that should have been even better. Quoting Foolish colleague Ryan Fuhrmann from his take on the report:

The same-store-sales figures illustrate the divergent trends; Justice saw a stellar 22% improvement in comparable sales, while Limited Too reported a 7% fall. This resulted in an overall comp drop of 1%, as Tween operates twice as many Limited Too stores as it does for the much more popular Justice franchise. Management attributed the challenging Limited Too results to a miss in color selections in the sportswear segment, as well as increased cost-consciousness from moms facing rapidly rising gas prices. [Emphasis added.]

I don't doubt management's explanation, but these problems aren't new; some Fools saw the signs two summers ago. Here's how CAPS investor LifeIsGood123 put it in August of 2006: "Nobody really likes Limited Too anymore. And who the heck came up with the word 'tween'?"

I agree. Talk to me when Tween sheds those last few unwanted pounds or, better still, spins Justice off as a separate brand, a la Chipotle (NYSE:CMG).

Worst
But our winner, once again, is AMR. The struggling parent of carrier American Airlines is the worst of the world's worst industry for all of the reasons I cited in CAPS last month:

1. Labor problems. Pilots are taking ads out in the paper pointing fingers at management for customer service failures just as executives try to defend a ludicrous bonus plan. ...

2. Fuel prices. Oil over $114 a barrel as I write. [Above $135 per barrel as of earlier today.]

3. Lost revenue. Canceled flights. Customer defections. Overtime for MD-80 repairs.

All of this is as true today as it was then. But the story is worsening: AMR yesterday said it would cut jobs and capacity and introduce new fees for baggage.

It's so bad that the best a Standard & Poor's analyst could say about AMR is that he thinks it "has enough cash to avoid bankruptcy for the next year." Talk about faint praise.

AMR and its rapid descent toward the bankruptcy courts ... Wednesday'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.