This Week's 5 Dumbest Stock Moves
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. If the chairs are rocking, don't bother knocking
Folks in glass houses shouldn't throw biscuits.
Biglari Holdings' (NYS: BH) Sardar Biglari is ripping into Cracker Barrel (NAS: CBRL) , arguing that the chain of country-style eateries with attached gift shops is failing to separate the operating metrics for its restaurant and retail businesses.
Biglari has amassed a 9.3% stake in Cracker Barrel, so he's certainly entitled to his activist opinion. However, what does it say about someone who is complaining about a lack of reporting transparency -- clouding due diligence -- after he has already bought in.
We should also point out that Biglari's chains include industry laggards Steak n Shake and Western Sizzlin. Is Biglari really in a position to tell Cracker Barrel what to do? Besides, anyone who has gone to Cracker Barrel knows that the rustic gift shop treats and Southern-style eats go hand in hand with the experience. Even if one segment was outperforming the other, this isn't a Siamese twin that can be separated.
2. Homes on the range
This hasn't been a good week for real estate developers. The Commerce Department reported on Tuesday that new home sales dipped in July. The telltale housing metric is now at a five-month low after its third consecutive negative monthly showing.
Things didn't get any better a day later, when Toll Brothers (NYS: TOL) reported an unsettling spike in order cancellations for its latest quarter.
Don't read too much into the improvement in adjusted earnings, order backlog, and new contract signings. Until real estate prices bottom out, cancellations will continue.
Investors should continue to approach residential developers as they would a creaky estate being sold on an "as is" basis. It may seem like an opportunistic buy, but it may also very well be a money pit.
3. Couch potatoes on the loose
Shares of TiVo (NAS: TIVO) soared 17% yesterday, after the DVR pioneer posted better than expected results. Revenue climbed 19%, fueled by a dramatic spike in licensing revenue as more companies begin to play nicely with TiVo's lucrative patents.
Why does TiVo make it on the "dumbest moves" list after its well-received report? Well, I think the market is partying too soon. TiVo is still losing money. More problematic to the model itself, TiVo subscribers continue to shrink. TiVo closed out the quarter with about 1.93 million cumulative subscriptions, 33,000 fewer than it watched over just three months earlier and a sharp 456,000 plunge over the past year.
The licensing opportunities are substantial, but only if the platform itself isn't fading in a world where "on demand" streaming makes it less necessary to pay up for a DVR.
4. BlackBerry plays the blues
Social music is something that even the successful companies haven't been able to get right, so why is Research In Motion (NAS: RIMM) wasting its time here?
The BlackBerry maker is rolling out BBM Music, a service where smartphone owners will pay $5 a month for access to 50 songs from a large digital catalog. There is limited flexibility in swapping those songs out. The service expands when other friends are on the service, allowing for social sharing of tracks.
If this sounds familiar, it's because the all-but-forgotten Zune tried to set itself apart through social sharing. It didn't pan out. You can't go viral if you're playing solitaire.
Is music a major priority for BlackBerry users anyway? The folks that I know still jockeying BlackBerry smartphones aren't the earbud-donning type.
This service is likely to last about as long as a punk song.
Pacific Sunwear (NAS: PSUN) shares are closing in on dollar-menu prices after the beachy keen teen retailer posted a cloudy near-term outlook.
PacSun may have posted a narrower than expected deficit on slightly positive comps in its fiscal second quarter, but it's now bracing investors for a plunge back into negative same-store sales and a much larger loss than the pros were targeting.
"Hang 10" may be a surfer greeting, but it may as well be a boardroom mandate at this point.
Which of these five moves do you think is the dumbest? Share your thoughts in the comment box below.
At the time thisarticle was published The Motley Fool owns shares of Research In Motion and Biglari Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. 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, except for Cracker Barrel. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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