As Wall Street gets off to a historically bad start in 2016, TheStreet's Real Money team is unveiling its "Stressed Out" index of 20 troubled companies that you should be adding to your distressed watch list.
These companies may initially appear as bargains to investors as they trade in the single digits. However, focusing solely on low stock prices, instead of debt, is done at investors' own peril.
"Many of the smaller dollar amount stocks didn't get there because management wanted you to start buying them by the boatload," said Jim Cramer. "No CEO wants their stock to trade in the single digits. They trade there because the equity is compromised by the debt side of the equation."
These companies carry unsustainable debt loads and have a history of burning cash and resources in the absence of steady cash flow. The amount of interest these companies currently owe compromises them significantly. Investors who try to get in now are financing the ability of these companies to service their debt instead of their growth.
Real Money put together a list of incredible value right now, a list of the companies with the most stretched, or stressed out, balance sheets, one where the stocks themselves may be far more at risk than you otherwise would understand if you just looked at one side of the ledger. The companies range across sectors -- retail, oil and gas, basic materials, telecoms and more -- and the Real Money team will be providing deep-dive analysis of the debt and equity problems that are sending shares to record low levels.
We put together this list because, in many ways, these are the companies that could hurt this market more than any other. These are the ones that are most in danger of the dreaded "reorganization."
No doubt some of these will come through this period without a problem. But others just plain won't and their common stocks may end up being delisted and worthless.
In addition to providing continuing coverage on the names listed in the original 20 "Stressed Out" companies, Real Money will actively add newcomers and remove existing targets as management proves successful in executing turnarounds.
So, without further ado, here's the "Stressed Out" index, arranged in alphabetical order, which we will be monitoring like a hawk:
- 3D Systems (DDD)
- Advanced Micro Devices (AMD)
- AK Steel (AKS)
- Avon Products (AVP)
- Chesapeake Energy (CHK)
- Encana (ECA)
- Freeport-McMoRan (FCX)
- McDermott (MDR)
- Navient (NAVI)
- Office Depot (ODP)
- Petrobras (PBR)
- Southwestern Energy (SWN)
- Sprint (S)
- Tidewater (TDW)
- TimkenSteel (TMST)
- Transocean (RIG)
- U.S. Steel (X)
- Ultra Petroleum (UPL)
- Vale (VALE)
- Weatherford International (WFT)
For more on Real Money's 20 distressed companies to watch: