Fortunes have been made over the last nine months in the stock market, as those investors who didn't panic, and purchased stocks in the spring of 2009, have seen some of those positions move up by 400-500% in less than a year.
Despite these huge moves, plenty of stocks still have the potential to make an investor rich if they get anywhere close to where they were trading before the recession and financial crisis. These stocks are high risk, and in some cases they have large debt loads, so investors should research carefully before jumping in any of these names.
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Four For Fortune Or Failure
Eastman Kodak (NYSE: EK) traded above $25 per share just before the start of the recession, and it hit $2 at the trough. The stock has since settled back around $4 per share. The company received a major investment from Kohlberg Kravis Roberts & Co. last fall in the form of debt and warrants. Although the market balked at the deal due to the potential dilution of up to 20% if the warrants are exercised, the cash may give Kodak time to grow its businesses and survive the recession.
Kodak does have issues with the transition to digital technology and has spent years transitioning the company to meet that change. Its success at this transition has been mixed.
Liz Claiborne (NYSE: LIZ) peaked at close to $45 a share before hitting $1.61 at the trough. The stock has settled into trading in the $4-$5 range. Liz Claiborne may have a rough road ahead, as the company just reported a large loss in its most recent quarter. Also, analysts have said that Liz Claiborne is plagued with issues related to building its brands and its distribution channel.
Ambac Financial Group (NYSE: ABK) traded above $90 per share before tumbling down to its current price under $1, where it faces possible delisting by the exchange. Despite this, Ambac was just upgraded by Standard & Poor's, and according to the company, will see its $856 million in excess capital boosted by a $440 million tax refund next year. MBIA (NYSE: MBI) is another financial guarantee company that lost its way, peaking at over $70 per share before hitting the low single digits.
Are Potential Losses Lurking?
The big issue for Ambac Financial Group and MBIA, of course, is the amount of transparency regarding future risk. Are huge potential losses lurking behind the scenes that haven't hit the tape yet?
Although these stocks provide a huge upside to investors, the risk is also high due to lingering problems with the recession and access to credit. Another thing to consider is that some of these companies have problems that predated the recession and will have to deal with them once the economy clears up. (For more, check out Make Your Portfolio Safer With Risky Investments.)
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