Stocks doomed for failure
I am interviewing for an equity analyst position tomorrow, and have been sent a list of questions that will be asked.
One of them is the following:
Tell me a company that you think is destined for failure and why.
Any ideas?
The best I can come up with is Radio Shack. I will need rationale to backup the answer.
Thanks
Book publishers. eReaders are the future of reading. I have Kindle and it's the 3rd most useful gadget I have, after laptop & smartphone.
Chinese manufacturers. Cheaper dollar, trade balance adjustments- the secular long-run trend works against Chinese manufacturing.
i think book publishers are too easy. doesnt make for a good story. go with a short on nflx.
Youku... its absurdly overvalued. Chinese internet stocks = bubble.
short netflix? lots of hedge funds have been burned on that
Look at any airline with a broken business model and that is hemorrhaging money. There is a battle of attrition within the airline industry with those finding a happy mix between low-cost and/or differentiated service succeeding (think Southwest and Jet Blue for economy or Virgin for luxury and chic travel). I would say US Airways is a piece of crap and their financial performance corroborates this.
...depending on the political climate: defence
Agree with above posts....look to China
HMV - three profit warning since January; is absolutely screwed.
Two questions: (1) what is your time horizon, and (2) what are you defining as failure?
If you want to define failure as a good company with a crap stock, that could give you more options. Wal-Mart, for instance, was a great company growing square footage, driving national productivity and growing earnings steadily in the last decade. The stock, however, has grown 4% as the S&P grew 18%. That's a failure right there even if the business model works.
I wouldn't discount Chinese names for the sake of them being Chinese. As a whole they do tend to be overvalued, but there are some whose projected growth rates seem reasonable for the space that they're in. Furthermore, especially for the ones that are partially government owned and aligned with the Party's 5-year plans, there's a certain floor beyond which they won't fail because the Chinese government is propping it up. You'll need to go a little deeper to show that you've thought critically about this.
Instead of looking at names that you recognize, look at small-cap names with a 1-trick pony business that could be rendered obsolescent, especially that small-caps are over-valued at the moment relative to large-caps.
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