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?>>Also: 20 S&P Stocks With Huge Insider Selling 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.
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