TheDumbMoney (47.35)

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DEATHwatch List

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March 29, 2012 – Comments (5) | RELATED TICKERS: RSH , BBRY , BBY

Famously (in my own mind) I declared RIMM a deadman walking in June 2011. See here.

My thesis was that over summer 2011 companies would figure out that Microsoft Exchange could now provide all the security to Android and iPhones that had 'till then been RIMM's sole distinguishing (or, frankly, positive) feature. And businesses would switch. And it did. And they did. This call was primarily anectodal, based on what my company was doing: we went from a 95% RIMM shop to a 95% iPhone shop as soon as iPhones became available -- it was nearly instantaneous. And so today's report indicates that RIMM continues to spiral the drain.

Many of us have watchlists. But do you have a "Deathwatch List" (TM)? Here's one for me:

RIMM (my exact call above was a buy-or-be-bought out call)

BBY (closing 80 stores now, hmmm. But earnings "beat expectations." Hmmm. Toast

RSH (I forcast secular decline; they have no reason to exist that I can tell, no moat, no competitive advantage at all; they also have an outdated and archaic name)

SHLD (I think they'll eventually either go b/k or otherwise shutter all stores, and this company will live on only as a holding company for the Diehard and Kenmore brands, which will be more widely distributed and marketed)

Any other candidates?

One I have been considering (it would have been on this list if I had written it two years ago) is Garmin. However, state "safe driver" legislation preventing people from using cellphones whole driving has proven a huge boon for this company, since most people would want to use GPS apps while driving. (Query why using a GPS app is any less dangerous than monkeying with a GPS device while in the car, but the laws are what they are.) And they are more diversified than people think they are.

5 Comments – Post Your Own

#1) On March 29, 2012 at 5:53 PM, Mega (99.96) wrote:

http://caps.fool.com/Blogs/2012-prediction-potential/686039

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#2) On March 30, 2012 at 1:56 AM, kristm (99.70) wrote:

New federal regulations being considered would essentially outlaw GPS usage while the vehicle is moving. Garmin will die faster than RIMM if the rules are put into place.

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#3) On March 30, 2012 at 3:53 PM, TheDumbMoney (47.35) wrote:

kristm, I think the present pending bill makes exceptiosn for voice-activated GPS. But I don't consider Garmin a buy. I just don't think its situation is as dire as RIMMs. It has a big business in things like avionics and fish finders that insulates it a bit, too.

Mega, nice list, though I'm more interested in looking for around-the-bend secular decline based on business model failure than on companies literally numerically teetering on the edge of going b/k. Realistically, without a recession the companies on my list above probably all have five years left in them. Since my framework is based on looking for companies I can hold for five years or ten, that's the angle from which I approach this: what companies would I absolutely not want to buy stock in and just trust without looking that they'll still exist in ten years. I won $50 on a 2007 bet against an employee of American Funds that GM or Ford would be b/k within five years. Around that time I also put EK on my informal deadman walking list, though it lasted longer than I thought it would.

General: My biggest error was thinking banks would be OK in 2007/2008 (the Bill Miller error), and my record is far from perfect. Also, I think people are wrong in their secular decline calls on HPQ, MSFT, and CSCO, and the jury is still out on those picks. Of those three, HPQ is the most likely to prove me wrong.

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#4) On March 30, 2012 at 4:19 PM, CluckChicken (31.19) wrote:

BKS - Barnes & Noble should be added to your list. Very few things that they sell are found at a better price then at Amazon.

I guess adding any one of the smaller airlines, they seem to come and go on a regular basis. Also it doesnt hurt that the industry rarely turns a profit.

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#5) On March 30, 2012 at 4:23 PM, TheDumbMoney (47.35) wrote: