MILLBURN, N.J. ( TheStreet) -- Every October for the past three years, I have presented my list of the worst-run companies in the U.S. It is time to unveil 2009's list of ignominious public corporations, but first, let's turn back the clock and see how past honorees have fared:

2006 Inductees

Alcoa ( AA): The company and its stock have floundered the past few years, suffering from the lack of aluminum demand and the concurrent decline in aluminum prices. The best decision that management has made in recent history was to raise $1.3 billion in March through a series of common stock and convertible debt offerings. The Cash for Clunkers program may have helped boost some short-term auto production, and demand from Boeing ( BA) for its 787 Dreamliner is beginning to get off the ground. Other than that, the revenue side of Alcoa's business model remains constrained. Alcoa is still alive and may survive, but it still has a whole host of operational and management issues to overcome.

Alcatel-Lucent ( ALU): This telecommunications company was never able to rejuvenate itself after the tech and telecom bust nearly a decade ago. Alcatel has cleaned up its balance sheet and is managing to survive to some extent, but it is still on the endangered company list.

Cablevision ( CVC): The Dolan family has managed to destroy shareholder value while increasing its own wealth for many years. Cablevision is saddled with debt and has negative book value, yet the company has managed to collect a series of prime properties. The New York Knicks, a Cablevision asset, are a long-term laughingstock of the NBA and will have to sign Lebron James to save the franchise. But Cablevision has managed to endure a global debt crisis and deep recession, so while the company is poorly managed, it appears to be a survivor.

Janus Capital ( JNS): Once an investment management maverick in the 1990s, Janus is now an also-ran to the likes of Blackrock ( BLK), Franklin Resources ( BEN) and T. Rowe Price ( TROW).

Pier One ( PIR): Pier One has not generated positive earnings in years. When the whole world was trading down during a recession, everyone seemed to miss Pier One along the highways. What is saving this company is a lack of any significant amount of debt.

Sharper Image: Filed for bankruptcy.

2007 Inductees

Palm ( PALM): Palm has had its up and downs. Right now it's on a roll, thanks to the smartphone boom -- that is to say, relative to itself. Compared with Apple ( AAPL) and Research In Motion ( RIMM), Palm is rather insignificant. Time will be the true test for the company, but for now it has a reprieve.

Circuit City: Filed for bankruptcy.

Charter Communications: Filed for bankruptcy.

Six Flags: Filed for bankruptcy.

Washington Mutual: Declared insolvent and seized by the FDIC, Washington Mutual is now a part of JPMorgan's ( JPM) retail banking unit.

2008 Inductees

Macy's ( M): Of all the companies on my list, Macy's is the most likely to turn itself around. After biting off too much in acquisitions and expanding too much, the retailer is carrying a significant amount of debt. Macy's is caught in the squeeze between the discount retailers such as Wal-Mart ( WMT) and the luxury retailers such as Nordstrom ( JWN). Macy's is still a poorly managed company, but I see some glimmers of hope.

General Motors: Filed for bankruptcy.

Time Warner ( TWX): The publishing business stinks, AOL was the worst acquisition of all time, and the balance sheet is a horror. While Time Warner has been able to pare back debt, goodwill is still sitting on the balance sheet like a festering sore. The latest installment of the Harry Potter series was a disappointment compared with its predecessors. Management still has its hands full, and I am still not sure that it's the right management to lead Time Warner out of the wilderness. Now, on to this year's list.

My Criteria

While not all the companies on my list suffer from all of the following problems, they meet at least one or more of these negative characteristics, making them lousy investments and potentially excellent short sales.

  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?
  3. Ineffective management: Successful companies will have management teams that not only innovate but also can perform during times of stress. In fact, innovation does not simply mean 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.

Class of 2009

May I have the envelope? Here are the latest companies to be added to the Worst Run Company Club for 2009.

Advance Micro Devices ( AMD): AMD is the quintessential second banana to semiconductor monolith Intel ( INTC). Whether times are good or times are bad, one thing is certain: AMD will likely post an annual earnings loss. The company is also operating under the strain of a huge amount of net debt. Finally, it seems as if the entire smartphone boom has left AMD behind in the dust, and the company still resides in a desktop business model mentality.

Sirius XM Radio ( SIRI): That this company hasn't made my list in the past is a major oversight on my part. Sirius XM -- the merger of two poorly managed and capitalized companies, Sirisu and XM -- is a classic case of a great product (satellite radio) coupled with a bad business model. The company is burdened with more than $3 billion in long-term debt and $4.5 billion of intangibles and goodwill. The strategy of giving large deals to big-name stars such as Howard Stern and Chris "Mad Dog" Russo doesn't really seem to have paid off. Management relied heavily on the automobile industry to spur sales, and we know how successful that has been. Perhaps government-sponsored cash for transistor radio program could help Sirius survive. Its date with destiny will be in bankruptcy court.

Jamba Juice ( JMBA): My readers might wonder why I have never placed a restaurant company on my list of worst-managed companies. Perhaps now the time is right. I warned the subscribers of my newsletter, The LakeView Restaurant & Food Chain Report, about Jamba back in January. Unfortunately, it has had a lousy track record since coming public in June 2005 at $8 per share. As is usual with these "fad" companies, early success was short-lived. The problem with Jamba is its lack of a full menu. Other than a few baked goods, it only serves juice and juice blends. That is not enough menu diversification to attract diners and generate growth. I would not recommend bellying up to the Jamba juice bar.

-- Written by Scott Rothbort in Millburn, N.J.
At the time of publication, Rothbort was long Apple and RIM, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.

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