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Published: June 24, 2010
When Circuit City went bankrupt in 2008, it
should have been immediately clear that rival Best Buy (NYSE:
BBY) was set to win a whole bunch of new customers. But the
economy was lousy, so investors were in no hurry to go after
shares of Best Buy. They should have been. Just a few quarters
later, Best Buy was delivering great results, and shares, which
had fallen below $20 in the market swoon of early 2009, jumped
past $40 by the middle of 2009.
We've seen this all before. When Chrysler and GM had to
radically shrink to survive, it was clear that Ford (NYSE: F)
could pick up
market share. It did, and shares, belatedly, quadrupled.
Only recently, we saw Pier One (NYSE: PIR) boast that
business has never been better, now that Linens & Things is out
of business. But Linens & Things closed up shop more than a year
ago, and any market share shift took a few quarters to become
apparent.
Investors may have a chance to profit from a possible bankruptcy
once again. YRC Worldwide (Nasdaq: YRCW), the nation's
third-largest trucking firm, has seen its shares fall to $0.17
from a 52-week high of $6.18 in September. YRC pushed hard to
achieve cost savings while keeping creditors at bay. Earlier
this month, it amended its borrowing agreements and was able to
get some more cash in the door, but it increasingly looks as if
YRC may need to shrink while under bankruptcy protection in
order to survive -- unless the economy posts a sudden strong
recovery. As YRC sheds certain routes, rivals Arkansas Best (Nasdaq:
ABFS) and Con-Way (NYSE: CNW) stand to pick up market
share.
As it happens, the
major rail carriers
have been taking
market share,
leaving less
business for the
trucking firms -- a
problem that was
exacerbated by the
economic slowdown.
This business is all
about scale, and if
Con-Way and ABFS can
pick up some of
YRC's business, then
results could be
quite robust as the
economy rebounds,
now that they have
leaner cost
structures.
Investors may also
want to dig into the
ramifications of a
potential bankruptcy
filing by Trico
Marine (Nasdaq: TRMA),
which provides
marine support
services to offshore
drillers. Rivals
such as
Oceaneering (NYSE:
OII) and
Seacor Holdings
(NYSE: CKH) look
like beneficiaries,
either through
increased market
share, or through a
chance to pick up
Trico Marine's
assets on the cheap
through bankruptcy
court, if it comes
to that.
Action to Take
--> The
best time to move is
when you see a stock
falling sharply,
hurdling toward
zero. That usually
implies that a
bankruptcy filing
may be coming. By
reading the
company's last 10-K
and other financial
sources, you can
glean a sense of
market share
dynamics, and which
companies are
perceived as key
rivals.
If the economy
remains in
low-growth mode, or
dips back into
recession as some
suspect, we'll see
an increasing number
of bankruptcy
filings.
-- David Sterman
Staff Writer
StreetAuthority |
