Lessons From Enron's Meltdown

The Nasdaq crash was expected in many quarters. But only a tiny number of stock market skeptics foresaw the equally gruesome meltdown in large energy stocks such as Enron (ENE Quote) and Calpine (CPN Quote).

Who were the prescient few? A handful of short-sellers, people who seek to profit from a stock's decline, and a couple of independent analysts. But investors of all stripes can learn from their willingness to question Wall Street's assumptions.

First off, why would anyone have thought about betting against the likes of Enron and Calpine? Neither company has missed earnings targets recently. In fact, Calpine confirmed Friday that it still expects to post 26% earnings growth next year. Both firms' profits growth has been outstanding for many quarters. Neither sported the stratospheric valuations that were common in the tech sector. Unlike tech, the energy segment of the economy isn't in recession and appears to have solid long-term growth prospects. ...