MILLBURN, N.J. ( Stockpickr) -- The time has come to unveil my annual list of the year's worst-run companies. While many of these poorly managed public corporations have been bad investments (or, should I say, good short sales), only some have redeemed themselves. The rest continue on the road to bankruptcy.
The companies on my list suffer from at least one of the following negative characteristics:
1. Poor Financial Condition
: Heavy debt loads, large amounts of goodwill and poor cash flow are common among poorly run companies. As a result, their balance sheets are in lousy shape. The inability to shore up balance sheets could spell further danger in the future.
2. Second Banana Syndrome
: Some of the companies on my list are not what would you refer to as "best of breed." Most of them are in an industry or sector that has at least one more-dominant competitor. After all, why swill beer when you can sip champagne?
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3. Ineffective Management
: Successful companies will have management teams that not only innovate but also can perform during times of stress. Innovation does not mean simply introducing a single "cool" product, as Sharper Image did with the Ionic Breeze Air Purifier. Effective innovation and management are about being able to transform a company into a provider of a well-balanced and diversified line of products.
4. Strategic Mistakes
: This can take many forms. One of the most damaging mistakes is a large acquisition that turns out to be costly. Take Washington Mutual, for example. The company acquired Providian, a subprime-type credit card issuer, for $6.5 billion in 2006.
First let's review the roster of my list of worst-run companies from years past and see how they've fared lately:
Class of 2006
(AA - Get Report)
: In the last year, Alcoa has gone nowhere. Earnings have improved, but that was an easy goal compared with the prior year. I have yet to see any member of this management team be able to manage to anything other than the economic cycle. The stock is lower by about 6% over the past year.
: The company's business model remains challenged as management watches the world of technology and telecommunications pass it by. The stock is lower by about 20% over the past year.
: Just when you thought you'd heard everything from Cablevision, now the company is
engaged in a fight
with Rupert Murdoch's Fox division of
. The Dolans run Cablevision for their own personal gain, without regard for the shareholders, but the company is in the right businesses now, which has resulted in stock price appreciation of 12% in the last year.
>>Who Owns Cablevision?: