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The
Death List includes two stock portfolios that we think are risky business.
Of course, we don’t know for sure that they’re heading down; so don’t
sell them short based on our opinion. However, you might want to do a
little extra due diligence if you own them.
Last updated using data from 8/20/10,
next scheduled update: 9/3/10
Death
List #1: High Debt
These firms have
built up
debt levels that
could be a drag on earnings and cash flow for years to
come. We've employed a variety of financial strength tests to
pinpoint this list of potential underperformers.
Leverage Ratio:
total assets
divided by shareholders’ equity. A firm with no
debt would have a leverage ratio of one, and the higher the
debt, the higher the ratio.
Interest Coverage: amount of annual interest covered by a cash flow
measure (EBITDA). A ratio of 1.0 means that annual interest and EBITDA are
equal. Ratios of 4.0 or higher reflect solid balance sheets. Negative
ratios reflect negative cash flow.
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