The Next Biggest Losers

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

Pick the winners, don't pick the losers.  That's the name of the game, right?  With that in mind, some might say don't even worry about the losers.  Your focus should be on the winners.  Isn't it easier to pick the losers?  When a company fails, don't we all say we could see that coming from a mile away?  I can't tell you who will win at dodgeball, but I can tell you that the overweight kid with thick spectacles trying to figure out how to grip the ball is definitely not going to win.

You clicked on this article to see the next stock that will go to zero.  Well, that isn't as easy as it seems.  I'll give you reasons why I think these stocks may go to zero and some reasons they might not.  Let me know if you agree or disagree in the comments section.  

BlackBerry (NASDAQ: BBRY)
Why It's A Loser: In 2006, I longed for a BlackBerry.  My boss' primary superpower was the ability to respond to a message under the table during a meeting.  But that is when it all started going downhill for Research in Motion (BlackBerry).  The iPhone came out in 2007 and it didn't have physical buttons.  People thought that was weird for a while until it became the "it device," and then it was weird to have a phone with buttons (again Blackberry).  The latest attempt at relevance, Blackberry 10, is only good if you are still set on Blackberry, but pales next to other mobile operating systems.  

Why It's A Winner: Would you believe me if I told you there are still some 79 million Blackberry subscribers worldwide?  It's astonishing isn't it?  The way this doesn't go to zero is if BlackBerry can still keep at least a slight majority of those subscribers with the new operating system.  Still, someone must know something I don't.  The stock has risen a whopping +105% since September 2012.  

RIMM data by YCharts

Barnes & Noble (NYSE: BKS)
Why It's A Loser: One word: Amazon.  They don't have the overhead of a physical bookstore.  If it is books you are after, Amazon is likely the cheapest option.  Books are a commodity, and Barnes and Noble's copy of that bestseller is no different than the Amazon version.  The only thing Barnes and Noble can offer is the ability to get it the same day (and with a cup of coffee).  For that convenience, you pay a premium for the book.  Barnes and Noble also has the Nook business.  It has been and will continue to be a distant fourth place to the iPad, Kindle and other Android tablets.  

Why It's A Winner: There is only one way I see that Barnes and Noble can become a winner: shrink the number of stores (and probably the physical footprint of those stores).  Barnes and Noble stores are typically the anchor of the shopping centers they inhabit and the effort to quickly cut locations will be hard.  I can see a market for a "chain" bookstores that specializes in hard-to-find books (first editions, signatures, etc.).  

BKS data by YCharts

Facebook (NASDAQ: FB)
Why It's A Loser:  Do you remember a social media site called Friendster?  No?  Neither do I.  I experienced MySpace first hand.  The ability to customize your own page with HTML was cool, but who really knows HTML?  A new platform sprang up.  All the cool people were on it.  You created an account back in 2006.  Then your mom got on Facebook.  And your grandparents.  Now you are connected with 14 "family members" you haven't seen in years and the people that seem to be clogging up your timeline are annoying acquaintances.  Do you unfriend them?  Would they be mad if they found out?  This once cool social media site has turned into a hassle.  Soon another will sprout that seems like less of a hassle and has more of a cool factor and people will jump ship.  Or have they already?  Facebook, meet Twitter.  

Why It's A Winner: It's a winner if Facebook can find a way to monetize the 1.06 billion active monthly users.  That's really the only path to success.  You have shareholders to please now.  The problem is that you can't charge users or they will leave.  You can sell their information, but that angers your customers.  They've got some investors believing they can do it, though.  The stock is up 54% since its low in September 2012.  

FB data by YCharts

Groupon (NASDAQ: GRPN)
Why It's A Loser:  Groupon takes a cut of at least 30% from an already heavily discounted transaction.  What is the better value proposition for a business owner?  Advertise with Groupon via the terms above or offer a 20% discount to anyone that will show their Facebook check-in and has a minimum of 200 friends?  What is to stop another company from offering to take a slightly smaller cut and gain market share?  It is tough to win in a game where all your customers care about is price.  Unless you are Amazon, that is. . .

Why It's A Winner:  Groupon has an audience of tens of millions of users.  If they can partner with those businesses to offer value-added services and help the businesses optimize their business (cost reductions, shipping service consolidation, etc.) while also bringing customers to the door through the discount model, they might have something special. 

GRPN data by YCharts

Do you recognize a common thread in these selections?  None of them have a strong moat around their business.  Maybe this article will help explain moats a little more.  

Now it is time for you to chime in.  Do you agree or disagree with my selections?


robbielaney has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. 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

Compare Brokers

Fool Disclosure