The house rules are simple in this weekly column.
I bash a stock that I think is heading lower. I offset the sting by recommending three stocks as portfolio replacements.
Who gets tossed out this week? Come on down, Sony
Only the Sony can play
Shares of Sony are rocking higher this morning, bouncing back after getting pounded on Thursday on the heels of a nasty quarterly report.
It could be that investors are starting to rally around the board announcement earlier this week that cost-cutting insider Kazuo Hirai will be taking over as the troubled consumer electronic giant's new CEO.
Yes, he's an insider. Yes, he was heading up the PlayStation division that has lost ground in recent years. However, everything that I've read on Hirai makes it seem as if he's the bold free thinker that Sony needs if it wants to stick around after three brutal years of losses.
I'm applauding the Hirai move, but it really doesn't matter. Even Steve Jobs couldn't save Sony now.
Let's analyze Sony's business. In its prime, PlayStation was a huge contributor to Sony's bottom line. Well, Sony's no longer the top dog in video game consoles. The fact that it has resorted to margin-slashing console price cuts to even remain somewhat relevant in this niche really only makes matters worse.
If I asked an audience of die-hard gamers to raise their hands if they think this month's PS Vita has a shot at its $250 price point, I wouldn't crowd surf in that bunch. I would drop -- and so will Sony's handheld device.
Sony is best known for its consumer electronics, but that's an even uglier realm. Its once-bread-and-butter TV business has posted seven consecutive years of losses. Sony's exports are obviously stinging from the strong Japanese yen, but one would have to be naive to think that Sony can return to prominence there.
Why buy a Sony Blu-ray player when streaming is the future? Why buy a Sony camera or camcorder when casual users may be just fine with the improving quality of smartphone cameras and the wider accessibility to online data storage? Who needs Sony audio components, when we live in Pandora's
One can argue that Sony is lucky enough to have a strong presence in video and audio entertainment, but Sony's history of overprotecting its media has backfired. Sony's inability to weave content and hardware together in a market-acceptable manner has been catastrophic, and now it's too late to change that.
Sony joined hard-drive makers, PC companies, and automakers yesterday in blaming last year's flooding in Thailand for supply chain and manufacturing woes. In Sony's case it's a scapegoat. The others can't get their product out quickly enough. Sony still can't find buyers. Revenue doesn't tumble 17% unless you're doing something wrong.
As I do every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting the heave-ho. Let's go over the three fill-ins.
Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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