Balance sheets are too strong. Though this is counterintuitive, too many well-financed companies are a negative for investors. A torrent of capital during the bubble years created excess capacity and provided companies with exceptional staying power. In a normal cyclical decline, a natural winnowing process purges weak companies, such as those laden with debt, from the competitive landscape. Instead, excess capital still dominates the scene, even in the face of reduced demand.
As a result, we have more than a few desperate companies flailing about in search of a market. Witness
(AAPL) foray into music,
(GTW) sales of LCD television screens and
(GLW) push into the ceramics business for pollution-control devices.
Most leading Nasdaq companies are not shareholder-friendly. I'm not interested in allocating capital to companies that aggressively transfer property from shareholders to employees through excessive stock-option programs. I've written before about
Time for Tech's Comeback? Not So Fast
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