I know it's tempting. I know what you're thinking: If I can catch a big ride on one of these beaten-down stocks, I can get my portfolio back to where it was in March 2000.
Forget it. Rip up those old statements. Treat them like UFOs. Instead, think singles and doubles instead of homers. While a number of glamour stocks have been decimated, they deserve to be decimated. I am an opportunist. I've looked at all of them. They are a collective disaster, and they are not worth the risk.
Let's start with
Jim Cramer's favorite punching bag,
. As bad as this situation is, it is going to get worse before it is over. And while the Bushies may have been willing to help out Bill Gates with his little Justice Department problem, they will not go near this one with a 10-foot pole. Enron is not an energy company. It is a trading company. Moreover, it appears they are not particularly good traders.
Instead of Enron, invest your money with the best trading company in the world,
. These guys have probably been picking Enron's pockets for years. Isn't it interesting that Goldman Sachs was unwilling to participate in the recent short-term loans to Enron, an investment banking client? They might actually know what's behind the curtain.
I worked at Goldman Sachs for eight years, and I have tremendous respect for them. They know how to trade. They made a ton of money handling Sid Bass' recent 125 million-share block of
stock. Forget about the 6-cent-per-share fee they charged. How about the 10 million to 20 million shares that they kept for themselves? I imagine that Goldman made more than $30 million on this one trade. Not a bad day's work.
Stay away from
. Taken in the best light, the company is way too aggressive with its accounting; Qwest bullies the analyst community and it overpromises and underdelivers. Qwest has justifiably lost the trust of the investment community. It will take years of execution and fence-mending to earn this trust back. Ask Cendant CEO Henry Silverman. He is still paying for the damage inflicted upon him by former Cendant Chairman Walter Forbes, who has pleaded not guilty to conspiracy and wire fraud charges.
instead. These guys actually get it. They are among the telecom industry's best operators, and they are the best dealmakers. Like everyone else, they goofed, but they have found religion. This quarter's operating results show some promise. Previously skeptical analysts at Lehman and Merrill had some nice things to say about the company. I think WorldCom is an up stock from here. It is not going back to the $60s, but I could see it above the driving age by year-end.
I know it's also tempting to think that if the economy rebounds, consumer finance stocks will scream. You are turned on by
. Providian recently hired my pals at Goldman Sachs to help them out.
Forget this, too. Providian feels like a doughnut to me. Their balance sheet is a mess. We do not know how bad it is. They may not know how bad it is. Moreover, they were not candid with the investment community.
Conseco announced that Gary Wendt and other senior managers bought a bunch of stock with their own money. While I love to see management buying stock, this one feels too staged to me. Pre-Wendt, Conseco had a long history of management buying stock with loans from the corporate treasury. Moreover, 1 million shares (or $3 million) is not that much money to Wendt. I would like to see him buy $25 million of restricted stock directly from the company.
Conseco is probably the best speculative bet of the bunch, but I would still pass. It is a very high-risk situation, given the leveraged state of its balance sheet. Wendt is a tremendous manager, and he did a great job with
. However, he would not be the first guy to have a sequel that bombs at the box office.
instead. Citigroup is the biggest and best financial services company in the world. While Wendt is something special, I would draft Weill and Rubin ahead of him in my CEO Rotisserie League.
The best way to make money is to stay out of trouble. Stick with singles and doubles. Don't be tempted.
Brett Messing is partner of Oscar Capital Management LLC, an investment adviser that is based in New York and Los Angeles, registered with the SEC and has approximately $1 billion in assets. At the time of publication, Oscar Capital and its clients were long Goldman Sachs, WorldCom and Citigroup, though positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Messing appreciates your feedback and invites you to send it along.