We've all had that heartbreaking stock on our watchlist, or perhaps in our portfolio -- the one that always claims the big money will start rolling in next quarter. But when it does report, the wheels fall off, for seemingly the umpteenth time.
There's only so many times a company can small-f fool me before it's finally time to kick it to the curb for good. While I don't currently own either of these two companies, they have been mainstays on my watchlist over the years. Now it's finally time to part ways for good with these perpetual disappointments.
Overstock.com (Nasdaq: OSTK)
Newsflash: Sith lords didn't destroy your stock's value, Mr. Byrne -- your operating performance took care of that!
Having successfully watched Amazon.com (Nasdaq: AMZN) and auction-site eBay (Nasdaq: EBAY) rise to their current success, I figured that Overstock.com would surely follow suit. I mean, the idea seemed flawless. Selling steeply discounted items that couldn't be sold in traditional department stores should yield big profits. But that just hasn't been the case.
In its latest quarterly filing, the company's loss ballooned dramatically, with gross margins falling during the quarter. But the key reason I'm casting Overstock out for good has to do with a one-liner in its report:
The primary reasons for the low growth rate were decreasing unique visits on our websites compared to last year, and fewer new customers due in part to lower traffic and merchandising sales mix shift in certain customer generating categories, particularly media and consumer electronics.
If you're a current Overstock shareholder, reading that must feel like getting stabbed through the heart. Overstock's entire business model depends on two factors: Generating new customer traffic and selling higher margin electronic items. In summation, the company stated that site traffic is slowing, and higher-margin products simply aren't moving, as users turn to competitors instead.
It's been nice knowing you, Overstock!
Orbitz Worldwide (NYSE: OWW)
I've always enjoyed using Orbitz to book my personal vacations. I only wish that my love for its online travel-booking platform translated into bottom-line results as well.
Relative to considerably larger peers priceline.com (Nasdaq: PCLN) and Expedia (Nasdaq: EXPE), being an Orbitz investor simply hasn't made sense. As practically a permanent addition to my watchlist, Orbitz has languished with quarterly loss after quarterly loss, while its peers continue to grow at a double-digit pace.
If last quarter was any indication of where the company is headed, it might be time to start looking for a different booking agent. Orbitz's quarterly loss more than doubled, while bookings fell by 7% and hotel revenue took a 2% dive. Now compare this to Expedia, which just reported a 27% jump in hotel revenue, and try not to frown if you're a current Orbitz shareholder.
Orbitz CEO Barney Harford blamed the abysmal quarterly performance on throwing an extensive amount of cash flow at building up its booking platform, and from losing AMR's (NYSE: AMR) American Airlines as a booking partner during the quarter. Investors, including myself, have been patiently waiting for years for Orbitz to deliver, but it continues to pour out substandard results.
It's officially time for me to Orbitz, and go ... away.
Foolish roundup
Just because you like a company's service doesn't mean you have to fall in love with its stock. I've used both Overstock and Orbitz in the past, but they have made for terrible investments over the past few years. Knowing when to hold 'em and when to fold 'em is all part of the investing game, and at this point, it's time to say goodbye to these two for good!
What companies are you ready to throw out with the garbage? Share your thoughts in the comments section below, and consider adding Overstock.com, and Orbitz Worldwide to your watchlist to keep up in the latest with each stock's respective sector.
