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Don't Get Suck(er)ed In
-- December 17, 2002
No matter how much good news you hear about the restructuring efforts of bankrupt firms like WorldCom, Global Crossing, Kmart, and United Airlines, it still doesn't mean that their stock is a good deal. Far from it.
Companies that have filed for bankruptcy should be the LAST prospects on your stock purchasing list. In fact, Safe Money Report doesn't recommend investing in any equities at the present time, with the exception of our specially selected gold mining shares. But if you are looking to buy stocks nonetheless -- just say 'NO' to these bankrupt "bargains"!
If you think that you are going to buy a cheap stock, wait for it to begin its recovery effort, and ride it up when the company is solvent again -- think again. You're likely to lose everything. In reality, the odds of coming out of Chapter 11 are one-in-four -- just 25%! But it gets worse. Of that 25%, one-in-three companies end up going BACK into Chapter 11.
Plus, even if you're not in it for the long haul, and you think you can buy and sell these stocks for a quick profit -- beware. These shares are not liquid and the demand could dry up as quickly as you can say "Chapter 11." It's like a game of hot potato -- and you'll likely be the one who gets burned.
Bottom line: Even cheap stocks can fall further.
It's Risky Buying Bankrupt Cos. Stock