Over the past few months, several investment professionals have brought up the topic of the down-and-out company of the day and whether to buy now as a speculation. Last year, K-Mart was the big news, and everyone wanted to know whether this was a good stock play. Today the news is focused on WorldCom and its downfall. Thus, some people are pondering this stock for quick profit potential.
Here's the scoop: Don't buy WorldCom.
I know! It's impossible for MCI to disappear: they're too big, they're too popular, their service is excellent, etc. That's the good news that everyone is talking about. But there's another side a darker side to the story. The company filed for bankruptcy because of their massive debt load, not just because of accounting failures. The accounting failures probably only came to light as a result of the company's lack of funds.
In the end, it will be the same story as K-Mart. It won't matter whether K-Mart or MCI survive, the shareholders will not. If the business survives still debatable in K-Mart's case, but more likely in MCI's business ownership will be transferred to the bondholders and other creditors by law. This is what bankruptcy courts do. Shareholders get nothing. If you want to gamble on MCI/WorldCom, you might consider their bonds rather than their stocks, although that option may not be great either.
So, is it pointless to look at "down-and-out" stocks as quick turnaround opportunities? Well, we may avoid the "down-and-out", and instead just invest in the "down-and-uncertain". These can be awesome opportunities, but be aware that the risks are sometimes high among these downtrodden firms.
Here is a list of 25 of these beaten down stocks which today sell for under $5. Some are well-known businesses, other names are less commonly known. Some are dot.coms suffering from the fallout of that moniker, while some languish in other areas of high tech. The energy market has taken more than its share of hits since Enron's collapse, and that industry is well represented on the list. Telecom, still reeling from WorldCom's collapse, is also present. For variety, the list includes everything from media to education, from international trade financing to pencil-graphite production.
If you're convinced that buying the beaten down is the best way to make money, this should provide you vastly better choices than K-Mart or WorldCom. Anything on this list is better than those two doomed stocks. While a few are pending investigation (*starred), most have fallen simply because of the whims of the market. Some are even maintaining profits in this tough environment.
With the market in the doldrums, out-of-favor companies sometimes fall more than would be rational. As a result, you might find great buys in stocks like this. But in this market, there are great buys everywhere. The question is when to buy.
Market timing is not necessarily wise, but when the market is falling as harshly as it has been, one can afford to wait until the stock is so low that you are virtually certain it can't go lower. Some of these stocks have reached that level.
To send comments or to learn more about Scott Pearson's Investment Advisor Services, visit http://www.valueview.net
Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.
How many times have you said to yourself, "I'd like... Read More
If you have not back tested your trading system, you... Read More
As one of my regular readers you know I have... Read More
Recently I watched my favorite football team lose a vital... Read More
There are many important things you need to know to... Read More
Ever notice how behavior in one area of life can... Read More
Mutual funds and brokers are always preaching not to buy... Read More
Has your broker been calling you recently with the "great... Read More
If you're like many investors who squander those small dividend... Read More
Caught in a whirlpool and being sucked under. No life... Read More
We all know that emotions control every decision that an... Read More
In one of my previous articles (Investing in the stock... Read More
Well maybe that's overstating it a little, but it's certainly... Read More
After finding the price of a particular stock, usually the... Read More
One of the great truisms of Wall Street is "Don't... Read More
The spring-loaded rat catcher is the ultimate low-tech device invented... Read More
Every broker and financial planner will tell you that you... Read More
One of the basic laws of physics is that a... Read More
You may have wondered why your mutual funds have been... Read More
One Saturday morning, while he was sitting at his computer... Read More
Jack and Jill went up the hill to fetch a... Read More
An insane person cannot evaluate an insane evaluation system.As you... Read More
According to Investopedia Inc. the penny stock market has seen... Read More
The trash business in its efforts to cook their books... Read More
Invest in the stock market for the RIGHT reason, using... Read More
Index Fund Trading can be one of the most profitable...or... Read More
What is the Series 7 Exam? If you... Read More
Very few people, even professionals, have heard of the Dalbar... Read More
Stocks breakout from properly formed bases everyday but many investors... Read More
Many people would like to diversify their portfolios to expand... Read More
Every stock market investor faces one primal enemy. An enemy... Read More
If you are fed up with early redemption charges and... Read More
Wall Street's watchword has always been diversification, but what does... Read More
One of the basic laws of physics states that a... Read More
I love roller coasters. The steeper the better. High and... Read More
I was devastated!I just couldn't believe it. I was 10... Read More
With the internet such a huge part of our daily... Read More
This is the continuing story of our two imaginary traders,... Read More
Regardless of the fact that the world's stock markets have... Read More
In 1960 an engineer working for a watch company in... Read More
If you're a normal human being, your need to feel... Read More
Because there are so many stocks that are NOT paying... Read More
AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More
Ever wondered what is a mutual fund? A mutual fund... Read More
It seems that every day I turn on the TV... Read More
It has often been said that there is only two... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
Every day I hear someone on CNBC proclaim that "this... Read More
The trash business in its efforts to cook their books... Read More
In his wonderful book, 'Multiple Streams of Income', best selling... Read More
In 1960 an engineer working for a watch company in... Read More
During the month of January the Dow Jones Industrial Average,... Read More
A few years back ? it seems like an eternity... Read More
The Dow TheoryCharles H. Dow... Read More
What a great statement!I just heard someone use it in... Read More
As GuruFocus updates the stock buys and sells of gurus,... Read More
At some time in your life you have been on... Read More
Quick, look out the window. It's raining. No, the sun's... Read More
How do you invest? What do you really pay? At... Read More
I would like to share with the reader an article... Read More
Mutual fund investing is a lot like Thai cooking. Everyone... Read More
When purchasing mutual funds we are cautioned to read the... Read More
TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More
Financial markets provide their participants with the most favorable conditions... Read More
There are major differences between trading stocks and trading futures.... Read More
A stock market index is a statistical measure of changes... Read More
Stocks & Mutual Fund |