20 Companies Most Likely to Go Bankrupt in Next Year 47 comments
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In addition to the updated problem bank list we posted up the other day, we saw this and thought it would be worth flagging for those interested. Audit Integrity, an independent research firm, has highlighted the top 20 companies that they believe have the highest probability of filing for bankruptcy. They limited this specific list to publicly traded firms that have over $1 billion market capitalization. In no particular order:
- Advanced Micro Devices, Inc. (AMD)
- Amkor Technology, Inc. (AMKR)
- AMR Corporation (AMR)
- Apartment Investment and Management Co. (AIV)
- CBS Corporation (CBS)
- Continental Airlines, Inc. (CAL)
- Federal-Mogul Corporation (FDML)
- Hertz Global Holdings, Inc. (HTZ)
- Interpublic Group of Companies, Inc. (IPG)
- Las Vegas Sands Corp. (LVS)
- Liberty Media Corporation (Capital) (LCAPA)
- Macy's, Inc. (M)
- Mylan Inc. (MYL)
- Oshkosh Corporation (OSK)
- Redwood Trust, Inc. (RWT)
- Rite Aid Corporation (RAD)
- Sirius XM Radio Inc. (SIRI)
- Sprint Nextel Corporation (S)
- Textron Inc. (TXT)
- The Goodyear Tire & Rubber Company (GT)
They rate over 12,000 companies so as always take these with a grain of salt and obviously do the necessary due diligence on them. One particular company on the list is intriguing though: Textron. The private jet manufacturer has been on a volatile ride over the last year (to say the least) and our friends over at Zero Hedge have done some excellent sleuthing regarding various activities Textron has conducted with Goldman Sachs as of late.
Source: Reuters
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This article has 47 comments:
Apparently Audit Integrity has a bunch of "special bus" children as analysts. Over 1 billion market cap narrows that 12,000 down considerably, but come on--- Goodyear, Oshkosh, Liberty Media---no possibility of "Failure"!!!
Where are the Regional Banks, Commercial Property, Consumer cyclicals and Homebuilders that have been hammered for the past year with no clear real estate recovery in sight???
No- these clowns simply screened on some arbitrary level or ratio of debt an failed to put real thought to the results...
Try screening "best 3 month share price performers" and I bet a number of these same 20 pop-up on that screen as well.
I'll take the profit today over "next years" speculated fear...
PEACE
Some analysts predict this year for SIRI to be a year of growth. Target price rose from $1 per share to $5 per share by the end of the 2009.
Article also mentioned about relationship with GOOGLE (GOOG), which is apparently going to use SIRI in cars as Internet provider for so called "MOBIL Wi-Fi", a new revolutionary technology that going change the way we think of Internet. SIRI Internet is going to be introduced in Geneva, on oct.9th at WTC (world tech convention).
Nevertheless, with all the good news SIRI is declined.
Makes you wander: who are those people that willing to sell it? Are they nuts? Doesn't make any sense, giving the thought that investor's goal is to make money.
On Sep 17 01:58 PM A Random Mock wrote:
> I bought this around 7 cents and am enjoying the climb, but am not
> too confident about the future. The major concern of mine is that
> Howard Stern's contract is up at the end of next year. As a current
> subscriber, I am pretty confident that there will be very significant
> attrition if he leaves. So while the short term may looks positive,
> I would keep your ears open regarding Stern's contractual status
> and its likely effect on subscribers.
soon there wont be any newspapers to print this junk
may I suggest a short term job at Movie Gallery as well?
what prompts you people to print this ? do you have friends in high places that want the move down in these issues esp siri- so they dont loose their shorts?
who may I send a bill to to cover to cost of my lost based on your ability to floobds the world with your cystal ball
you people have been given far to much power to say what you wish- why did you stop at 20-because there are no more/ what about 25 37 or 50 companies Macys? what about sears?
how many on your wish list are worthy of a takeover/buyout before the rapture?
Liberty Media?
the phrase irrational exuberance didnt bode well either
On Sep 17 01:26 PM Orlik wrote:
> European source today delivers the news about SIRIUS XM (seekingalpha.com/symbo...)
> going to start its operations in China. Winning 1,3 billion market
> seems like a good idea. Esp with GM's presence there already.
>
> Some analysts predict this year for SIRI to be a year of growth.
> Target price rose from $1 per share to $5 per share by the end of
> the 2009.
>
> Article also mentioned about relationship with GOOGLE (seekingalpha.com/symbo...),
> which is apparently going to use SIRI in cars as Internet provider
> for so called "MOBIL Wi-Fi", a new revolutionary technology that
> going change the way we think of Internet. SIRI Internet is going
> to be introduced in Geneva, on oct.9th at WTC (world tech convention).
>
>
> Nevertheless, with all the good news SIRI is declined.
>
> Makes you wander: who are those people that willing to sell it? Are
> they nuts? Doesn't make any sense, giving the thought that investor's
> goal is to make money.
>
All valid measures of a company's liklihood of prosperity into the future have now turned positive for Sirius XM and legitimate investors are now committed to this company for the long haul. Any near term pullbacks are likely to run into solid underlying support and recoveries are sure to follow, leading to additional measured moves to gradually higher prices over the intermediate term. The number one story driving investor psychology at the moment is the likelihood that 3rd and 4th Qtr. releases (due in November and February) will reflect the benefits of renewed auto production and the recent introduction of new wireless Apps and devices that substantially broaden Sirius XM distribution into the future. Investors and analysts are gradually taking stronger note of all this and this favorable psychology should remain dominant in coming weeks and months.
they're paying $400mil/yr in interest -- that ALONE will sink them. not to mention the nearly $4 bil in principal to pay back.
you guys talk about how they are nearly making money EXCLUDING interest.... guess what? that won't save you from bankruptcy. including interest they are losing money hand over fist and it's getting worse every quarter as they issue more debt to buy more time.... (only reason they want more time is for management to pay themselves their ridiculous salaries)
the debt holders own this company - it's just a matter of time... the common is worthless.
one of you SIRI bulls show me - in numbers - how they will come out of this please.
On Sep 17 04:41 PM jswede wrote:
> is it a pre-requisite to be clueless about debt to invest in Sirius?
>
>
> they're paying $400mil/yr in interest -- that ALONE will sink them.
> not to mention the nearly $4 bil in principal to pay back.
>
> you guys talk about how they are nearly making money EXCLUDING interest....
> guess what? that won't save you from bankruptcy. including interest
> they are losing money hand over fist and it's getting worse every
> quarter as they issue more debt to buy more time.... (only reason
> they want more time is for management to pay themselves their ridiculous
> salaries)
>
> the debt holders own this company - it's just a matter of time...
> the common is worthless.
>
> one of you SIRI bulls show me - in numbers - how they will come out
> of this please.
$7.5bil in assets includes $2bil in licenses, $650mil in "intangibles" and $1.8bil in "goodwill". That's $4.5bil of made-up value just to keep the balance sheet 'balanced'.
The $3.2bil in satellites are specialized so they would be worth very little as well -- even DTV can't use them.
Stockholders' equity is at $143mil.... take away just the 'goodwill' and you're in a hole you'll never get out of -- now add in the other worthless assets and tell me where you're at.
Point is they are not making money and the interest is far outpacing the cashflow -- and in the eventual restructuring the common is worth $0.00... the debt may be worth 50-75 cents on the dollar.
I'd rather look at the real data, the real financial statements - in this case you have a dead company walking. No way around it - dead and buried in debt (and 'debt service', something you guys think doesn't exist). All you have is hope to hang onto with this one. 'Hope' that they can turn around the subscriber trend and add another 30 million subscribers, or 150% growth, by 2012.... lol. that's absurd, but believe it if you wish.
I'm not the same poster as doom -- check my history - I've been around much longer, and I was in fact a SIRI bull til early 2008. shocking you would come up with a conspiracy theory... shocking.
On Sep 17 05:24 PM R A F wrote:
> The collective judgment of the market - as seen in the impressive
> recovery from the February lows - is that Sirius XM's business
> plan and potential going forward will more than cover the concerns
> noted by jswede in comments above. As I mentioned a few days ago
> - we now have two posters on these pages who write virtually the
> same, in terms of style and agenda, as our old friend SIRI-Doom.
> Could we be seeing one person writing under multiple ID's?
On Sep 17 06:20 PM jswede wrote:
> 'collective judgement of the market'..!??!?! were you born yesterday?
> this is the same market that was valued ~35% less 6mos ago? when
> was it correct - 6mos ago or today? you are apparently saying today?
> any reason other than that it suits your long position?
>
> I'd rather look at the real data, the real financial statements -
> in this case you have a dead company walking. No way around it -
> dead and buried in debt (and 'debt service', something you guys think
> doesn't exist). All you have is hope to hang onto with this one.
> 'Hope' that they can turn around the subscriber trend and add another
> 30 million subscribers, or 150% growth, by 2012.... lol. that's
> absurd, but believe it if you wish.
>
> I'm not the same poster as doom -- check my history - I've been around
> much longer, and I was in fact a SIRI bull til early 2008. shocking
> you would come up with a conspiracy theory... shocking.
>
> On Sep 17 05:24 PM R A F wrote:
On Sep 17 06:07 PM jswede wrote:
> yea - I've done the research.
>
> $7.5bil in assets includes $2bil in licenses, $650mil in "intangibles"
> and $1.8bil in "goodwill". That's $4.5bil of made-up value just
> to keep the balance sheet 'balanced'.
>
> The $3.2bil in satellites are specialized so they would be worth
> very little as well -- even DTV can't use them.
>
> Stockholders' equity is at $143mil.... take away just the 'goodwill'
> and you're in a hole you'll never get out of -- now add in the other
> worthless assets and tell me where you're at.
>
> Point is they are not making money and the interest is far outpacing
> the cashflow -- and in the eventual restructuring the common is worth
> $0.00... the debt may be worth 50-75 cents on the dollar.
Since AIV is right now losing money each quarter, they will not be able to keep up debt service, which will mean they will have to sell assets at a loss. True the lender eats the loss on each project/property, but this operation depends on the (formerly) positive cashflows from those properties. With negative cashflow, then losing the properties, the remaining cash on the balance sheet (which isn't much) withers and the company runs out of money.
If 85% of your assets are real estate / property / plants, and any hope of going cashflow positive again is reliant on those assets performing, deflation will kill you. I don't know the company, but after spending 3 minutes with AIV's balance sheet and income statement and this seems entirely plausible.
On Sep 17 06:31 PM zorro6204 wrote:
> What nonsense! Obviously this was based on some kind of stupid ratio
> analysis, because if you know anything at all about AIV's debt, then
> you would realize they are probably the LEAST likely company to go
> bankrupt, at least of those corporations that have any debt at all.
> In fact, given that virtually all of their debt is nonrecourse tied
> to projects, it's difficult to see how it's even possible!
I don't care if they have $100billion in annual revenue, it's their net income that matters. and it's negative.
If I pay $3k/mo in mortgage for a rental property and rent it out for $2800/mo, by your logic I should be bragging about the $2800 I'm pulling in and just forget that it's actually a loss overall?
The 'synergies' you speak of are in the numbers already -- they are not separate so you can't count them again. (nevermind that to achieve those 'synergies' the company went so deep into debt that they'll never get out.... 'synergies'... sounds really good though, huh? )
On Sep 17 09:40 PM connorport wrote:
> You left
> out one thing. The $2.7 billion in annual revenue. Also the $500
> million in so far created synergies of the combined two companies.
> But who counts that?
Short interest is at 124mil shares - excluding last month's 119mil, that's the LOWEST it's been sine March '08. It's 64% lower than just 2 months ago (194mil on 6/30). It was at 270mil shares in Jan, and averaged 275mil all of last fall.
3.3% of the the SIRI float is sold short. (124mil out of 3.77bil float) By comparison to any other media stock out there, that's TINY. For comparison, Charter Comm is at 5.6%, Liberty is at 4.8% and DTV is over 19%.
SIRI Short Interest Ratio (shares short / volume) is also at one of the lowest levels all year, at 1.48x -- it was 7.36x in June and over 11x in January.
More 'hope' and half-truths on your part, RAF. Actually no, that was a flat out lie.
Why don't you tell me RAF, year by year, how they will be able to pay interest of $400mil/yr for the next 3 years (plus $400mil in principal in '11, and a $246mil loan in '12), then another $2.2bil in interest and principal in '13? That's over $4 billion.
They need to make about a BILLION per year for the next 4yrs just to break even. Lay it out for me smart guy - how are they going to do that?
On Sep 17 11:53 PM R A F wrote:
> With short interest still running extremely high - 124,769,789
> shares as of 8/31 - it's not surprising we are seeing some of the
> comments above. The continuing strength of SIRI has done major damage
> to these shorts and threatens to do substantially more in coming
> weeks and months.
BTW, 'Market Folly' seems an appropriate name for the author, don't you think?
I suppose 124 million shares sold short has the same relevance whether the float is 125million or 125 billion.... ok.
you should not be managing anyone's money - not even your own.
On Sep 18 08:38 AM R A F wrote:
> jswede - I would suggest you pay close close attention to all data
> and commentary released in November and February with regard to your
> debt service concerns mentioned above. This topic will surely be
> thoroughly addressed at that time, both in the formal comments as
> well as the Q & A that will follow. As far as your thoughts
> about the exceptionally high level of short interest are concerned
> - please keep your eye on the ball, which is the absolute number
> - 124.7 million shares - not some absolute version of percentages,
> float, etc. The pain to holders of short positions is solely related
> to the number of shares they must cover in a rising market - not
> some "hypothetical" number such as # of days to cover, etc. Have
> a good day, jswede, and keep trying to cover your position on pullbacks,
> if you get a chance.
Thank You
Jim
No supporting evidence.
No explanation of the method(s) used to compile the list.
So, how would this list fare if the author had submitted it as coursework at any reputable business school?
Methinks that enough coursework such as this would earn its author a speedy departure from an impacted business school (All reputable business programs are impacted due to scarcity.), and the author would soon change his major to communications.
Raise your standards, oh readers and editors of Seeking Alpha. Hold your writers accountable for their claims.
A specific example in the list provided is Redwood Trust. RWT is an unusual mortgage REIT that uses equity capital to make unleveraged investments. The company's balance sheet appears highly leveraged but most of the Debt is non-recourse securitizations. Audit Integrity’s mechanistic approach can't distinguish between recourse and non-recourse debt and assumes incorrectly that RWT is highly leveraged.
These types of screens have value, but only as a starting point for further investigation.
finance.yahoo.com/tech...
They are just dividing the market cap by enterprise value. A stupid indicator of bankruptcy, since it doesn't even consider cash flow...
I thought seekingalpha had editors. What's the point of republishing something that is 1) simplistic and dumb, and 2) Yahoo has already published with more detail?
AIV is NOT losing money, that's GAAP crap. Cash flow is very much positive, they've weathered the great recession as well as anyone in that industry, with a goal of selling off non-core assets to eliminate all recourse debt. The stock price has gone up almost 300% from March. Apparently the market doesn't think it's going under!
On Sep 17 01:58 PM A Random Mock wrote:
> I bought this around 7 cents and am enjoying the climb, but am not
> too confident about the future. The major concern of mine is that
> Howard Stern's contract is up at the end of next year. As a current
> subscriber, I am pretty confident that there will be very significant
> attrition if he leaves. So while the short term may looks positive,
> I would keep your ears open regarding Stern's contractual status
> and its likely effect on subscribers.
1) They only looked at companies with market caps > $1 billion. That leaves a good many off the list due to having severely impaired financial conditions and hence low market valuations. My strong suspicion is that a good many of these companies are in far greater trouble than those that this company chose to examine and list.
2) Some of these same companies were listed several months ago by Moody's as likely to go bankrupt in 2009. Many of those stocks proceeded to increase in price 5 to 10 fold. At the time, I analyzed a few of them and noted that there was virtually no chance of bankruptcy - due to the fact that they had net positive cash flow and no significant debt maturities during 2009. Fast forward 6 months, and it is Moody's whose lifespan ought to be questions.
3) Pardon me for asking, but who is Audit Integrity, where do they get their funding to operate, and who is auditing them?
On Sep 17 10:49 PM Big Ben wrote:
> You go Jswede...preaching to the quire! I have been screaming on
> SIRI buzz to take profits and don't be greedy. They think I am a
> negative nancy and call me chicken little...LOL. Everyone has ADHD
> about the markets, everyone in six months has forgotten that your
> principle is at risk...sounds crazy. I lost my ass last year on siri
> and used that pig this year to get all of it back plus 8k. I am currently
> shorting China and shorting financials, FXP,FAZ....not doing so hot!
> I do think the pom pom party is almost over and we might test the
> march lows...sounds crazy but we will see.
>
> Big BEn
Cherry hit 1,000,000 cars per year in sales this year. Its fastest growing automaker in the world.
If SIRI and Cherry reach the deal, that could mean 1 million new subscribers per year!
SIRI officials say : "Indian TATA is their next target"
( thats 2,4 million cars per year in sales!)
SIRI is doing a very smart thing, expanding their business to China and India!