Five Stocks That Look Completely Worthless

My job as author of Morningstar.com's monthly "Most Overvalued Stocks" article gets harder every day. Our stock rating system is inherently contrarian: When stock prices fall more than our estimates of firms' intrinsic values, we end up with more 5-star calls and fewer 1-star calls. As of Nov. 10, we had only 16 1-star stocks in our coverage universe thanks to the market's almost unabated slide.

Luckily for me, there's one kind of 1-star call that never goes out of style: the zero-dollar fair value estimate. This is a tool we use sparingly. After all, every company has at least some "option" value: The stock price can never go below zero, but there is at least a small chance that the company could be worth some positive amount down the road. To any investors looking to unload their stocks for free, I have $0 sitting right here in my wallet for you (although, commissions could make even $0 too steep a price to pay).

We use the zero-dollar fair value estimate when we think that bankruptcy is much more likely than not. We've already had several successful $0 calls this year. Development-stage drug firm Atherogenics went bankrupt in October, but Morningstar analyst Bill Buhr declared the shares worthless way back in November 2007. Newspaper publisher GateHouse Media was recently delisted, which analyst Tom Corbett saw coming in July. Electronics retailer Circuit City has now declared bankruptcy--and analyst Brady Lemos estimated the company's fair value at $0 back in August.

Of the 16 remaining 1-star calls in our coverage universe, an incredible 15 of them have $0 fair value estimates. Below, we highlight five companies our analysts think are headed, sooner or later, for bankruptcy court.

Citadel Broadcasting Corporation CDL
From the Analyst Report: "Citadel Broadcasting's poorly timed acquisition of ABC Radio Networks only magnified the company's exposure to a stagnant industry with meager growth prospects. Given its substantial debt burden and declining cash flows, we think Citadel's shares could be worthless."

General Growth Properties GGP
From the Analyst Report: "Punch-drunk on easy credit, retail real estate investment trust (REIT) General Growth Properties is now staggering under the weight of its massive debt load. Raising capital or finding buyers for its commercial real estate assets may be difficult in the current credit-constrained environment, so we think it's likely that General Growth's equity value will fall to $0."

Mesa Air Group MESA
From the Analyst Report: "The future for regional carrier Mesa Air Group looks bleak, as the ill effects of both contract restructuring and a potentially devastating lawsuit mount.... Mesa boasts a debt/capital ratio of 0.93. To make matters worse, the firm recently paid roughly $52 million in a legal settlement...leaving the firm what we believe to be an insufficient $46 million in unrestricted cash."

Trans World Entertainment TWMC
From the Analyst Report: "In today's fiercely competitive retail environment, pure-play music and video retailers like Trans World Entertainment are facing an uphill battle, and we think the long-term outlook for this company is dismal.... The balance sheet is in decent shape,...[but] the company carries significant long-term lease obligations that aren't reflected on the balance sheet."