J. D. Swampfox

Capitally Challenged Stocks That Could Be Diluted or Extinguished

I too agree with your comment. When virtually all managers, including the government bureaucrat ones, have caught the "mismanagement disease", it has become systemic in nature...we can't diversify away from it and valuation multiples across the board have to come down.


On Mar 14 10:11 PM prudentinvestor wrote:

> This is an excellent article and a prudent view of current valuation
> metrics:
> (a) Balance Sheets Rule the Day.
> (b) Cash is King
> (c) Debt is Death.
>
> Unfortunately, many of our largest companies are managed by overpaid
> incompetents supervised by ignorant and irresponsible boards, who
> have failed to think through the sobering reality your article brings
> to light. Thus, they continue to embark on debt-fueled, cash-wasting
> mergers, ignoring the obvious lessons of a de-leveraging world. Dow
> Chemical was first, and has thus managed to morph, miraculously,
> from a US corporate powerhouse into a zombie on life support. Pfizer,
> then Merck followed close on Dow's heels, in an astonishing display
> of foolishness.
>
> The lesson I learnt in the past few months, is that one has to apply
> a "mismanagement discount" to stocks, since the probability of arrogant
> managers demolishing the value of perfectly excellent companies has
> to be added to the other uncertainties of this complex market climate.
>
>
> (disclosure: unhappy owner of shares in Dow, Pfizer, and Merck)