Dumb Luck Investor: Betting On Those $1 Stocks

For example, Internet stocks such as Webvan or Pets.com never had a prayer. As they fell apart, there were no legacy businesses or treasuries full of cash to prop them up. Consumers simply didn't depend on them as fundamental providers of goods or services; thus, they weren't essential to anyone for any specific thing.

Companies like UAL or WorldCom are far different, the argument goes. Would the federal government really allow such large employers to slide out of existence? (Well, actually, yes.) Don't these companies have so many customers that they could still operate within bankruptcy and eventually emerge from it? (Yes and no -- customers are more than happy to go with lower-cost options.)

And ultimately, doesn't their sheer size make them capable of staying afloat given mere mass alone? (Again, probably not. Arthur Andersen had thousands of employees and hundreds of large customers, and it closed its doors in a matter of months.)

Still, investors have short memories. For every Chrysler comeback, there are a hundred companies large and small that never make it. And even seemingly good news regarding a company's turnaround can merely end up being smoke and mirrors. WorldCom could be shaping up as a case in point.

Renamed MCI soon after the first of the year, WorldCom/MCI had swung to a steep loss in February after an accounting change began to straighten out its books. The company had posted a February loss of $332 million on revenue of $2.03 billion, though it was able to pinch out a March profit of $43 million on revenue of $2.1 billion.