When it comes to investing, no one gets it right all the time. Even highly-regarded stock market analysts can pick a few turkeys. But when experts go public with stock market predictions, their followers can end up losing a lot of money.
Whether a stock unexpectedly crashes in flames or soars beyond a pundit’s pessimism, it seems everyone takes notice. If you dare to see where the high and mighty fell to the low and wimpy, then check out the most embarrassing stock predictions of all time.
Share price: $30
Second Quarter Earnings 2015: $25.5 billion in net revenues (down 7 percent from last year)
When it comes to putting his neck on the line — and sometimes coming close to getting it chopped off — few, if any, rival Jim Cramer, the loudmouthed host of “Mad Money” on CNBC. On one hand, he must be doing something right since his show has been on the air for 10 years. But his wrong picks are legendary — Hewlett-Packard was one.
In 2012, he urged viewers to dump the stock based on his dim view that its corporate culture was broken. Within six months, HP shot up 115 percent.
“While some bad picks are unavoidable, as anyone attempting to time the market will inevitably make bad trades, some are beyond reproach, and HP was one,” said Leslie Bocskor, managing partner of Electrum Partners.
Best Buy (BBY)
Share price: $39
Second quarter earnings 2015: $8.5 billion in enterprise revenue (up about 1 percent from last year)
Here’s another highlight from that infamous episode of “Mad Money” when Cramer got it wrong about HP. He also told viewers to ditch Best Buy. “Exit these stocks immediately,” he urged. Cramer cited “terrible same store sales losses as well as a dramatic decline in cash flow” at the retailer. His pessimism was unfounded. Like HP, Best Buy rose 124 percent in the following six months.
Share price: $50
First quarter earnings 2015: $625.1 million in total revenues (up 7 percent from a year ago)
Bruce D. Vandegrift, vice president at Rockford Bank & Trust in Rockford, Ill., said that “outrageously erroneous financial predictions are so numerous that selecting the worst is an impossible task.” He cited a notorious blunder in 1999 by the former SmartMoney magazine. In its year-end predictions, it named a number of dot-com stocks as sure winners for the future. AOL was among them. “It was right before the dot-com bubble burst and enthusiasm was high on anything high tech,” he said.
In 2001, AOL entered into one of the most disastrous mergers ever with Time Warner. It lost more than 70 percent of its stock value, Vandergrift said. In June, Verizon acquired AOL and the newly retooled company has seen revenues rise.
Wall Street Crash of 1929
Even though the most devastating stock market crash in American history happened more than 85 years ago, the pain still resonates. On Oct. 24 of that year, the market lost 11 percent of its value. And just seven days before, the famous economist Irving Fisher offered a stunningly wrong prediction, recalled Robert R. Johnson, president and CEO of the American College of Financial Services in Bryn Mawr, Pa.
“Stock prices have reached what looks like a permanently high plateau,” Johnson quoted Fisher as saying. “I do not feel there will be soon, if ever, a 50- or 60-point break from present levels such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”
Johnson said that though Fisher was regarded as one of the giants in investment history, his ability to forecast market activity was poor. Likewise, his contemporary, renowned British economist John Maynard Keynes, famously said in 1927, “We will not have any more crashes in our time.”
WorldCom was once the second-biggest long distance telephone company in the nation after AT&T. It suffered a serious setback in 1999 after the Justice Department opposed the company’s proposed megamerger with Sprint over concerns that it would create a monopoly. Around that time, CEO Bernard Ebbers cooked up an accounting scandal to inflate WorldCom’s earnings. The stock went down in flames as the scandal unfolded but telecom analyst Jack Grubman stuck by it.
In April 2002, after the stock had fallen 94 percent from its June 1999 peak, Grubman finally downgraded his rating on WorldCom from a “buy” to a “neutral.” He never put a “sell” rating on the stock before it was de-listed. WorldCom subsequently became the biggest corporate bankruptcy ever.
In 2002, CNN Money headlined an article “Is Jack Grubman the Worst Analyst Ever?” Two years later, after the company emerged from Chapter 11, WorldCom stock was worthless. Today, WorldCom’s remnants are part of Verizon.
Stock Price: $544
Second quarter earnings 2015: $23.2 billion in revenue (up 20 percent from last year)
Former Microsoft CEO Steve Ballmer was once called “the worst CEO of a large publicly-traded American company” by Forbes in 2012. When it came to forecasting tech stocks — and this was a tech CEO — he was perhaps just as bad.
Ballmer appeared on PBS with Charlie Rose on October 22, 2014 and declared that Amazon was a bad investment. “They make no money,” he said. “In my world, you’re not a real business until you make some money.”
Since then, the online retailer has done nothing but make money for shareholders. It’s risen close to 79 percent in a year’s time. It’s also ranked as one of the top-performing stocks in the Standard & Poor 500 this year.
If you’re shaking your head at these bloopers, consider yourself lucky and forewarned. Be wary of following experts who make bold and sometimes outrageous predictions. Often times, they’re seeking attention and viewers. Even if they believe in their calls, investors stand to lose by making impulsive decisions.
Financial planners recommend that investors create a diversified portfolio to avoid the potential for one stock, or one bad call, to empty their account.