The 2012 Turkey of the Year

Jamie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It’s hard to believe that Thanksgiving has arrived. 2012 has flown by, and what an ignominious year it has been for the stock market. With the major indices looking to finish the year in a tailspin triggered by Fiscal Cliff fears, 2012 is shaping up to be another lost year for investors.

No wonder stock volumes are declining with individual investors choosing not to participate. It is a frustrating landscape indeed, and a very difficult place to navigate. The little guy really is at big disadvantage in the stock market for many reasons, including computing power – think high speed trading, inside information – there are more shenanigans than you might think, and absurd valuations supported by nonsensical hype – think Jim Cramer.

Expecting the little guy to continue participating in this game is fairly ludicrous. The disadvantages are only likely to get worse as time goes by. Not helping matters are the publicly traded stocks themselves. In some cases the level of ineptitude as to how these corporations run is enormous. The actions they often take are so far from the ideal of maximizing shareholder value, it is simply ludicrous. In some cases these corporations are flat out trying to take advantage of the little guy in favor of management, institutional and other large shareholders.

One tool the little guy has in his arsenal to fight back against these disadvantages is our voice. It might not resonate to the powers that be, but we must always call out those managements that are failing shareholders. I have 5 companies that have utterly failed the little investor in 2012, including my 2012 Turkey of the Year. So while you’re enjoying your turkey and trimmings, chew on these turkeys.

Turkey #5 – Netflix

It is never good being a one trick pony, but that is exactly what Netflix (NASDAQ: NFLX) is. On the surface, 2012 does not look all that bad for Netflix shareholders. The stock is actually showing a positive return for the year. The problem is how it got there.

The stock soared in the early part of the year to a nearly $130 per share, but fell into the $50’s by the summer before recovering to its current $80 price. Netflix is an example of all that is wrong with the market. None of the price action has anything to do with future value of the company. Instead, you get short sellers attacking the company and manipulating the share price. It’s all fairly nauseating if you are a small investor trying to make heads or tails of the situation. That’s where I fault management, and why Netflix is on this list of turkeys.

It is up to management to demonstrate that this one trick pony can be more than it currently is. So far, they have not done that in a convincing way. The game is moving to streaming content. The company is indeed vulnerable, and yet there is nothing for a long term individual to hang their hat on. Investors deserve better.

Turkey #4 – Hewlett Packard

Hewlett Packard (NYSE: HPQ) CEO Meg Whitman is the ultimate turkey. She rides into town on a shiny new horse and stellar reputation of corporate leadership excellence, and what does she do? She rests on her laurels, announcing that HP was likely to struggle badly in the short term before ultimately turning it around.

Small shareholders were screwed once again. Hey, how about just fixing the problem instead of lowering expectations? It was a perfect set-up for short sellers and they pounced on the opportunity. The death of the personal computer is killing industry titans like Hewlett Packard.

The problem for Whitman and her shareholders is there is no confidence in the future. Her actions remind me of Kevin Bacon in the parade scene of Animal House, telling the crowd, “All is well.” Well, all is not well and I see nothing from this turkey to fix the problems.

Turkey #3 – Groupon

Groupon (NASDAQ: GRPN) is an example of everything that is absolutely wrong with Wall Street. Investment banks bringing a stock like Groupon public have one mission and one mission only: maximize value for the venture capital investors that funded the business to its current state.

Getting them out safely (and richly) is priority number one. Accomplishing that mission requires maximum hype and one heck of a sales job. Amazingly, there are plenty of suckers still out there. In the case of Groupon it has been a straight course downhill since its initial public offering. The collapse in 2012 has been extraordinary and amazing. At the start of the year shares fetched $20 per share. Today the stock is worth $3.

The Ponzi scheme is coming to its ugly conclusion. Groupon has no viable business model, and even if you argue that they do have a business model, they have no competitive advantage. Even worse, there is no barrier to entry to its industry. How anyone thought otherwise about this turkey is stunning.

Turkey #2 – Green Mountain Coffee Roasters

When a company struggles for longer than a year, one has to really wonder what the ultimate outcome will be. In the case of Green Mountain Coffee Roasters (NASDAQ: GMCR) the stock peaked in 2011, but even then there was a question as to where this company was going. Possible competitive threats and market saturation were very real risks to shareholders.

Has management done anything to put worries over those risks to bed? Absolutely not, and the stock sinks, sinks, and sinks. Now late in 2012, the stock is trading in the mid-$20’s. That’s a stunning fall for a stock that a year or so ago fetched nearly $120 per share.

Now as the year is winding down this turkey is staring at a very real competitive threat from none other than Starbucks (NASDAQ: SBUX). That company is putting the full court press on with its single serve coffee machine, Verismo. What is Green Mountain’s response?

I’m not confident there will be one.

The 2012 Turkey of the Year – Best Buy

Individual investors should be rightly angered by the goings on at electronics retailer Best Buy (NYSE: BBY). The company is in a free fall. Management changes and the ouster of the company’s founder from the board of directors set the stage for failure in 2012.

Now that former founder is attempting to make a play for the company in an effort to restore Best Buy to its former glory, but the root of the trouble with Best Buy is multi-headed. There are a plethora of competitors offering similar products at similar or lower prices. More importantly, technology killer Apple rules the world of smartphones and tablet computers that are sold at Apple stores.

Best Buy does not have a chance, and yet the response from current leaders at the company is lacking in panic. They are seemingly brushing off the offer from the former founder and are of the belief that current sales decline are easily fixable.

It is a bit of déjà vu in the sense that we have seen this drama play out previously during the collapse of Circuit City. Nothing I saw in 2012 convinces me that Best Buy will avoid that outcome making them by far the 2012 turkey of the year.


jamdlu has no positions in the stocks mentioned above. The Motley Fool owns shares of Best Buy, Netflix, and Starbucks and has the following options: short DEC 2012 $21.00 calls on Green Mountain Coffee Roasters, short DEC 2012 $21.00 calls on Green Mountain Coffee Roasters, long DEC 2012 $16.00 puts on Green Mountain Coffee Roasters, long DEC 2012 $16.00 puts on Green Mountain Coffee Roasters, and short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Best Buy, Green Mountain Coffee Roasters, Netflix, and Starbucks. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus