Tags: John | Dorfman | Stocks | Avoid

Dorfman: Stay Away From These 10 Toxic Stocks

Friday, 05 Feb 2010 09:44 AM

Investment guru John Dorfman, chairman of Thunderstorm Capital in Boston. is waving investors off 10 potentially toxic stocks.

Dorfman tells investors that they should “not buy” Cablevision Systems Corp.

Dorfman also says investors should “stay away” from Moody’s Corp. and Dish Network Corp., in a recent column on Bloomberg News.

They should “avoid” Qwest Communications International Inc. and Mead Johnson Nutrition Co., he said.

What is more, investors should “be leery” of Pitney Bowes Inc., Delta Air Lines Inc., Morgan Stanley, Coca-Cola Enterprises Inc., and American International Group., he said.

“My reason for giving this advice: These companies, in my judgment, have some of the worst balance sheets in the U.S.,” writes Dorfman.

“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.”

Adds the investment expert, the next five companies have “positive net worth — stockholders’ equity — but their total debt is at least five times equity.”

There are compelling reasons, Dorfman writes, to prefer businesses with low debt.

A company with cash on hand and no bankers looking over its shoulder can buy troubled competitors or snatch assets that its debt-laden rivals need to shed, for example.

“I consider debt to be too high if it exceeds stockholders’ equity. Companies with steady cash flow — utilities, cable television operators, tobacco and liquor companies — can safely take on a bit more than that, so long as no game-changing events rock their industry.”

MSNBC is a reporting that many investors are now searching for firms with very low debt-to-equity ratios, because “cash and debt positions matter now more than ever.”

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Investment guru John Dorfman, chairman of Thunderstorm Capital in Boston.is waving investors off 10 potentially toxic stocks. Dorfman tells investors that they should not buy Cablevision Systems Corp. Dorfman also says investors should stay away from Moody s Corp. and...
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2010-44-05
Friday, 05 Feb 2010 09:44 AM
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