Years of losses may not be so bad for a stock. Neither, perhaps, is having more liabilities than assets.
Among the 28 large US companies with negative shareholder's equity and cumulative losses, 20 have risen so far this year.
Gainers include Lucent Technologies Inc, with US$25.4 billion in losses, and EchoStar Communications Corp, which has had a quarterly profit three times in eight years.
Some investors offered a simple explanation: Every dog has its day. Others said the gains show there may be bargains among the wreckage of the technology-stock bubble that peaked three years ago.
"It's a good lesson: Don't just walk away from negative equity, there's a chance to really create value," said Christopher Bonavico, who helps manage US$12.5 billion at Transamerica Investment Management.
Transamerica owns 7 million shares of EchoStar, the second-largest US satellite-television broadcaster. The Littleton, Colorado-based company has lost US$2.9 billion since it was started.
Its liabilities exceed its assets by US$1.2 billion and it has US$5.7 billion in debt.
EchoStar shares have jumped 50 percent this year, outpacing the 6 percent gain of the Standard & Poor's 500 Index. On Friday, EchoStar closed unchanged at US$33.28.
Bonavico credited the company's solid niche in a growing industry, its management and its cash. EchoStar, unlike even some profitable companies, has strong cash growth that should allow it to pay back its debt, he said.
The company's free cash flow, or cash from operations minus capital expenditures, rose to US$125 million in the first quarter from US$89 million a year earlier.
The stocks of other money-losing companies have fared even better than EchoStar's.
ImClone Systems Inc, the pharmaceutical company at the center of an insider-trading scandal, has risen 85 percent this year; the stock fell US$1.21 to US$19.63 Friday. Lucent, the largest US telephone-equipment maker, is up 71 percent. Amazon.com Inc, with US$3 billion in cumulative losses, has risen 64 percent. Shares in the Seattle-based company rose US$0.52 to US$30.97 Friday.
Many of the companies are in telecommunications, Internet, media and computer-related industries hurt by the slowdown in the US economy since 2000.
Their increases are just tracking the market, with the gains magnified because the shares already had fallen so much, said Joseph Stocke, chief investment officer at Stoneridge Investment Partners, which manages US$500 million.
Lucent, for instance, closed at US$2.15 on Friday after peaking at US$64.69 in December 1999.
"It's not surprising that these companies are outperforming -- just like when the market is going down, they tend to be the ones that get hardest hit," Stocke said.
Others said there could be real reason for optimism.
In telecommunications, some investors are betting that a decline in sales may have eased. First-quarter profit at AT&T Corp and BellSouth Corp topped forecasts.
Spending by US companies on communications equipment rose an annualized 19 percent in the first quarter from the fourth quarter, said James Glassman, senior US economist at J.P. Morgan Chase & Co.
"Last year's problems are often this year's winners," Glassman said.
Billionaire Warren Buffett, the world's second-richest man, is among the investors backing telecommunications.
Buffett's holding company, Berkshire Hathaway Inc, spent US$500 million with two partners last year to buy convertible bonds of Level 3 Communications Inc, a data-network company that has lost US$6.5 billion and has US$6.1 billion in debt.
Level 3 reported a first-quarter profit of US$119 million as sales more than tripled. Its shares, which closed Friday at US$5.97, have climbed 22 percent so far this year.
Warren Buffett has also bought US$98.3 million of junk bonds in Amazon.com, the world's largest Internet retailer. The Seattle-based company had a US$10.1 million first-quarter loss.
Bondholders have more protections than shareholders, typically the last to be paid back in a bankruptcy, said Jerry Dodson, who helps manage US$800 million as president of Parnassus Investments in San Francisco.
He said he views companies with negative equity as "deep waters" and avoids them for his clients. Still, many of them are cheap enough that a high-risk investor might try buying several in hopes at least one scores a big recovery, he said.
"If you have enough money to buy, say, 15 of them and it's not money you'll need to live on, be my guest," Dodson said.
"Some of them will double or triple when they bounce back -- if they're still alive."
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source