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. Muddying up the Chinese waters again
When Muddy Waters talks, worrywarts listen. Shares of Focus Media (NAS: FMCN) plummeted on Monday, after the advertising giant became the latest Chinese target of a bearish research report.
Muddy Waters is alleging that Focus Media is overstating the number of television screens in its LCD advertising network. It also suggests that the company has been overpaying for acquisitions to conceal its true financial state.
There was a time when bears were dismissed as wound-licking shorts, but it's a new world these days. When it's Muddy Waters doing the dissing -- often discrediting asset claims by Chinese companies -- the costly burden of proof suddenly falls on the company. Focus Media responded, denying the accusations. The company's chairman even bought a block of shares for himself. Jaded investors will still want tangible proof.
It bears reminding that Focus Media was set to sell most of its advertising business to SINA (NAS: SINA) a couple of years ago, but the deal fell apart. Either SINA dodged a bullet or it may have an attractive opportunity to give Focus Media a second shot.
2. You can't handle the Bluth
Netflix (NAS: NFLX) was garnering some warm fuzzy buzz over the weekend after revealing late last Friday night that it would be the exclusive home for Arrested Development's long-awaited fourth season come 2013.
However, those karma points were squandered on Monday afternoon after it revealed that it would be selling $400 million in convertible notes and stock to a venture capital firm. Why did Netflix wait until its stock got crushed to go this route? And is it a good thing or a bad thing that Netflix's former CFO is now with the venture capital firm on the other end of this deal?
Netflix has already told investors to brace for losses as it launches in Ireland and the UK next year, but apparently there was a cash crunch to worry about for the company to begin selling stock for a third of the price at which it bought it back earlier this year.
Are you sure that you can still afford Arrested Development, guys, or are you just trying to run the company like a Bluth sibling?
3. Buy a copy of Horrible Bosses at Wal-Mart
Wal-Mart (NYS: WMT) can't seem to catch a break.
If you began your holiday shopping last night, it was probably the handiwork of a handful of retailers that decided to beat the Black Friday rush by opening on Thursday night. Wal-Mart unleashed its "doorbuster" deals at 10pm last night, merely matching the tactics of other hungry retailers.
However, critics wonder if the practice -- where Wal-Mart has to beef up its staff for the early influx of shoppers -- is fair to retailer employees. Keying in on having hires cut their Thanksgiving celebrations short -- instead of focusing on the paychecks getting marginally bigger -- has dominated the conversation. And if Wal-Mart's in a pack, you know that it's going to be the one singled out.
Once again, Wal-Mart's a meanie.
This comes at a delicate time for the world's largest retailer. Sam Walton's retail empire is finally posting positive store-level comps, though profit margins are being challenged. If only there was a way for the discounter to bottle the hatred directed at it...
4. Sleigh away
The layaway revival is getting ridiculous.
Sears Holdings' (NAS: SHLD) Kmart became a Twitter advertiser, paying to promote its layaway service through popular micro-blogging website.
Let's go over the several layers of fail here:
- Kmart offers 8-week and 12-week layaway plans. What's the point in promoting layaway now when Christmas is just five weeks away? This is something to promote in early October.
- Kmart was promoting a $5 to $10 e-gift card, but that's essentially offsetting the value of the service fee (which, again, doesn't make sense when folks will have to complete the process in four weeks or less for the holidays).
- Layaway shopping -- where folks pay in weekly installments without receiving accrued interest and are forced to tack on a service charge and an even stiffer cancellation fee if they change their minds -- is a tax on the poor. How many people that need a set savings plan to prepay for a gift do you think are on Twitter? My guess? Not many.
It's easy to soak in the pessimism. There's a glut of ships out there, and that has forced spot rates to drop to a point where Frontline can't operate profitably. However, why did many of its rival tankers tank on the news? Ship Finance (NYS: SFL) suffered a double-digit percentage dip on the news, even though one would think that a shakeout -- forcing vessels out -- would be good for the companies still afloat.
If you want to track these companies to make sure that they don't make another dumb mistake soon, consider adding them to My Watchlist.
- AddWal-Mart Storesto My Watchlist.
- AddSears Holdingsto My Watchlist.
- AddNetflixto My Watchlist.
- AddFrontlineto My Watchlist.
- AddFocus Media Holdingto My Watchlist.
At the time this article was published The Motley Fool owns shares of Wal-Mart Stores.Motley Fool newsletter serviceshave recommended buying shares of Sina, Netflix, and Wal-Mart Stores.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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