Did you hear it? Today, we peeked above Nasdaq 2,000 but failed to hold. Pity. Then again, Nasdaq 2,000's not exactly the sound barrier. It's just another number, though we hope you weren't among those who argued that we'd never make it back. Nor those who insisted today that it's clear sailing from here.
The market has a knack for proving us wrong. Especially if we follow the pundits and worship round numbers as "psychological barriers." You can't take emotion out of the market, but you can do your utmost to keep it out of your portfolio. Nasdaq 3,000? Now, that's another story...
In today's Motley Fool Take:
- The New Vivendi
- Quote of Note
- FAO's Sad Toy Story
- Shameless Plug: Stocks 2004
- Take-Two Loses Shrek
- Discussion Board of the Day: Reality Television
- More Fool News
- And Finally...
The New Vivendi
On the big screen, Vivendi Universal SA
Such is the existential life of a French conglomerate. So far, however, these guys have done a tremendous job of turning the company around, as evidenced by yesterday's earnings announcement.
In fact, management indicated that more euros came in the door than flew out; that is, Vivendi earned approximately $157 million.
A joint venture with Vodafone Group
On the earnings call, management characterized liquidity issues as "way behind us." As evidence, we will no longer be treated to that familiar "liquidity" PowerPoint slide in future presentations. Good riddance.
And while hurdles remain in Vivendi's quest to unload its entertainment assets on the NBC network -- a unit of General Electric
Management warned investors not to extrapolate the third-quarter results into the fourth quarter, but this sounds overly cautious. Remember, the company's stated philosophy is "underpromise and overdeliver" -- a notion completely at odds with its former leader, Jean-Marie Messier.
There's work to be done, but this new-look Vivendi is worth watching.
Quote of Note
"If you can laugh at it, you can live with it. " -- Erma Bombeck
FAO's Sad Toy Story
Last month, toy retailer FAO (OTC: FAOO) was talking liquidity. Now it's talking liquidation.
The company said yesterday that it will file for Chapter 11 bankruptcy protection for itself and its ZB and FAO Schwarz businesses. It's sad news for those of us raised on regular trips to New York or on the '80s movie Big. (Think how silly Tom Hanks and Robert Loggia would have looked dancing in a toy store surrounded by moving men and downcast sales associates -- Loggia looked silly enough hawking orange juice.)
Alyce Lomax took a quick look at the broader issues surrounding the company in a story last month. Instead of recounting them here, this time might be better spent revisiting a worthy topic: What happens when a company's stock is delisted from a major exchange and begins trading, as bankrupt companies often do, over the counter with the letter "Q" affixed to the end of the ticker. (FAO has already begun the process of delisting its stock from the Nasdaq.)
We've seen some well-known companies follow this route over the years, and the temptation to follow them down in hopes of picking up a bargain can be strong. Don't give in. If you already own such a company, your best bet is probably to use it as a tax write-off. If you don't, the simplest advice we can give is: Stay away, Fools.
If a company has filed for Chapter 7, which FAO hasn't, a trustee is appointed to oversee the liquidation of all of the company's assets. Whatever money's made is distributed to the creditors. Generally speaking, common stockholders don't see dime one of this.
If a company does as FAO did and files for Chapter 11, it keeps operating while it works out a reorganization plan. Assuming the bankruptcy court approves it, the company gets protection from its creditors while it works on its plan -- and, with luck, returns to profitability. In this case a stockholder is playing the long odds that the company emerges from bankruptcy and will become a market-beating investment within a reasonable amount of time. This is asking an awful lot.
FAO isn't trying to mislead anyone. According to yesterday's press release, the company attempted but failed to sell part or all of the business, and thus it doesn't expect "any recovery would be available to its common stockholders." In short, it looks bad.
Fool Bill Mann probably put it best in a January 2002 article: However little you may be investing in a bankrupt company, and however "tempered" your expectations might be, "Putting some money in these companies is a bad idea, a monumentally bad idea. You are going to lose it all, so don't."
Revisit our Q&A on "When Good Stocks Go Bankrupt" for more information on what it means when a company "goes chapter."
Shameless Plug: Stocks 2004
For our Stocks 2004: The Investor's Guide to the Year Ahead, our analysts searched high and low for stocks at significant discounts relative to their true value. And they found some household names and others you've never heard of. If you're interested in fortifying your portfolio in the new year, Stocks 2004 has 11 companies worthy of your investment consideration. Order your copy today!
Take-Two Loses Shrek
Video game developer Take-Two Interactive Software
Shrek would have been the biggest license in the acquisition, which cost Take-Two approximately $22.5 million overall, including $5.4 million in restricted Take-Two common stock, $9.7 million of which was in liabilities to TDK USA, TDK's former parent company. Offsetting the removal of the Shrek license from the deal was an $8 million reduction in liabilities to TDK Mediactive under terms of the distribution agreement announced in September.
Here's the thing. Take-Two is known for the violent, edgy, mature nature of its video games -- including the famed Grand Theft Auto (GTA) series, State of Emergency, and the recently released Manhunt. The latter two hardly have mass appeal, and Manhunt is definitely not for the kids.
What TDK brings is a softer side with a little more mass appeal -- titles based on Disney
So even without Shrek, Take-Two now has a more well-rounded lineup. And this acquisition is just the latest in a consolidation wave that will likely continue, as the bigger players in the industry -- including Electronic Arts
Discussion Board of the Day: Reality Television
So did you watchThe Simple Life last night? Watching any other reality shows this season? Whatever became of scripted content programming? All this and more -- in the Reality Television discussion board. Only on Fool.com.
More Fool News
- Pensions Drive GM
- Writing on the Wall at Hollinger
- Wendy's Looks Well Done
- Pharmacyclics Turns It Up
- Defying Authority
For a list of all our stories from today, see Today's Headlines.
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Jeff Hwang, Tom Jacobs, LouAnn Lofton, Alyce Lomax, Bill Mann, Selena Maranjian, Dave Marino-Nachison, Rex Moore, Rick Munarriz, Reggie Santiago, Tom Taulli, Dayana Yochim