When Circuit City went bankrupt in 2008, it should have been
immediately clear that rival
Best Buy (NYSE:
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
We've seen this all before. When Chrysler and GM had to radically
shrink to survive, it was clear that
could pick up
. It did, and shares, belatedly, quadrupled. Only recently, we saw
Pier One (NYSE:
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
YRC Worldwide (Nasdaq:
, 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:
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:
, which provides marine support services to offshore drillers.
Rivals such as
Seacor Holdings (NYSE:
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
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
-- David Sterman
Disclosure: David Sterman does not own shares of any security
mentioned in this article.