Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. This rumor should be grounded
Unusually high trading volume in Expedia
Are gossip-hungry investors really that stupid? Google has spent the past six months trying to coax regulators into approving its pending $700 million purchase of travel technology provider ITA Software. Does anyone think that antitrust regulators would sign off on a deal that would be at least 10 times larger?
There's also the silly notion that an uptick in options activity is a prelude to a buyout kiss. It rarely plays out that way. Insider-trading bandits would be quickly sniffed out. In the end, options-gobbling speculators aren't necessarily any smarter than stock buyers, though I guess it's easier to profit from the rumormongering than to be left holding the bag when it doesn't pan out.
2. Too cool for school
Shares of postsecondary educator Strayer Education
This story doesn't end there, though. A day later, shares of larger rival Apollo Group
Teacher's pet, right?
Maybe not. Investors bidding up the University of Phoenix parent this week aren't out of the woods. The problem here is that Apollo is also dealing with an enrollment slump. Apollo dismisses the slowdown, painting it as an orchestrated move to "expand student protections and ensure that we enroll students who we believe have a greater likelihood to succeed in our programs."
I'm not buying it.
This was a sector that rocked during the recession, as Americans flocked to Web-based campuses as a cost-effective and convenient way to beef up resumes. Now that the economy is showing signs of life, the for-profit postsecondary niche is having a hard time proving that it was an all-weather space all along.
3. Adding injury to insult
Investors don't always know best.
In a shocking blow to Cedar Fair's
However, the real baffling vote -- which the company said was still "too close to call" -- was an investor mandate for Cedar Fair to prioritize chunky quarterly distributions over paying down its debt.
That's insane. Kinzel venom is one thing, but why wouldn't the thrill park operator hack away at its debt if feasible? Haven't these investors seen what happened at its flag-waving rival when it let its long-term debt grow out of control? Park sales, budget cuts, and eventually bankruptcy reorganization.
Yield to reason, investors.
4. "L" is for lessons, and "F" is for failed
The electronic toy maker seems to be happy with targeting 13% to 14% in sales growth for all of 2010, without explaining that LeapFrog grew its revenue by 27% through the first three quarters.
It brags about its first profitable year since 2005, but it doesn't point out that the $0.03 a share to $0.06 a share in earnings that it's now forecasting is a far cry from the $0.20 a share to $0.30 a share it was targeting just two months earlier.
This was like some advanced LeapFrog program, right? We were supposed to figure out that a positively written press release is actually bad news? What a sneaky teacher LeapFrog has become.
5. Gloomy wake-up call
Shares of Tuesday Morning
This is the kind of news that breaks all of the time, but I'm singling this one out to give you one chance to guess when Tuesday Morning put out this week's dreary report.
Exactly. The press release came out on Tuesday morning.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
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Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. He does 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.