Ten Stocks I Wouldn’t Touch With a 10-Foot Pole by John Dorfman
My reason for giving this advice: These companies, in my judgment, have some of the worst balance sheets in the U.S. The first five companies mentioned above have negative net worth; that is, their liabilities exceed their assets. Among the 727 U.S. companies with a stock-market value of $3 billion or more, only 17 have that unfortunate distinction.
The next five companies have positive net worth (stockholders’ equity) but their total debt is at least five times equity, a trait shared by 26 of those 727 companies.
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Here’s my take on 10 debt-laden companies to avoid.
Cablevision, based in Bethpage, New York, has posted annual losses in four of the past seven years. Like all cable operators, it faces potential competition from satellite and wireless technologies.
Moody’s, a bond rating and financial information firm based in New York, has come under heavy criticism for issuing bond ratings that were too uncritical. I think profits could be hurt by lawsuits alleging biased ratings. Rivals such as Standard & Poor’s, a unit of McGraw-Hill Cos., face similar issues but have stronger balance sheets. Warren Buffett’s Berkshire Hathaway Inc. has been cutting its stake in Moody’s during the past six months…
Investing in individual stocks is not necessary for a good financial plan but can provide great benefits. However, it does require more vigilance as you must keep an closer eye on your investments and make changes as necessary. Many chose not to include individual stocks in their portfolio, using mutual funds instead. That is fine, I do like to include stocks though. My 12 stocks for 10 years portfolio continue to do well (beating the S&P 500 by 4.8% annually after a 2% annual simulated expense fee reduction). One stock I particularly like right now is Google.
Related: Investing – My Thoughts at the End of 2009 – Lazy Portfolios Seven-year Winning Streak – Jubak Looks at 5 Technology Stocks