The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
By David Sterman
NEW YORK (
) -- Every year, the research team here at
looks over thousands of potential stock picks. We spend countless hours analyzing companies, looking for any signs that a stock is either a good or bad investment.
Most of the companies we research have both bullish and bearish factors to consider. But in a few rare instances -- literally less than 1% of the time -- we find a handful of stocks that boast some of the best business models on earth. These rare companies enjoy huge sustainable competitive advantages, pristine balance sheets, ample cash flow, and more often than not, they pay healthy dividends. When we find rare gems like these, we like to buy these stocks and hold them forever. In fact, we recently published an entire presentation on our
10 best "forever" stocks,
and it has become the single most popular piece of research in our company's decade-long history.
But sometimes we find companies that fall on the other side of the spectrum. Companies that are in such poor shape that they are at risk of going bankrupt. These companies often sport unnaturally high debt levels compared to their capital base, and we think you should avoid these stocks at all costs. If by some means they've already ended up in your portfolio, you might want to consider dumping them now.
Below you'll find a list of a dozen companies that I believe are at risk of failing.
By far, this is the most controversial article I've ever published. I'm obviously not making any friends on Wall Street by exposing these names, and my publisher has already fielded a number of angry phone calls from some of the companies that appear on the list below.
First, there's a difference between a company that's "at risk" of failing and a company that's "guaranteed" to fail. The stocks I profile in this article are "at risk" of failing -- they're not "guaranteed" to fail. In fact, many of the stocks on my list below may not fail. Second, the metric I'm using to determine a stock's level of "risk" is called the "current portion of long-term debt." Specifically, I'm looking for companies that have debts due within the next 12 months that exceed the total cash balance that each company has on hand. This metric has proven to be a highly accurate indicator of a company's health. In fact, it's already helped me correctly identify several "at risk" stocks before they went on to fail. That's why I use it.