Avoid These Losers

And I think that part of the "getting worse" is going to be a wave
of bankruptcies from household names. It's already started: The
bankruptcy proceedings or outright demise of companies like Circuit
City, Ritz Camera, and Bennigans suggest that when it all shakes out,
the streets of Generica are going to look a whole lot different.

Why? A lot of companies were riding the wave of that recently burst
asset bubble, which was fed -- or rather overstuffed -- with easy
credit and the over-indebted consumer. If they were struggling before
the market and the economy tanked, or if they were kept aloft by the
boom times' often silly extravagances… well, maybe it's time to wave
goodbye to them.

Bon voyage
It's easy to say that most companies
are struggling right now, but even in an economy like this one, some
are much worse off than others. How can you tell if a company is in
danger?

For example, the following companies all exhibit one or more of
these traits -- which means that in a difficult economy, I suspect they
will at the very least continue to struggle, and at worst fold
altogether. In any case, you'd be wise to avoid them.

RadioShack (NYSE: RSH): For goodness' sake! If Circuit
City's toast, I've got to wonder how RadioShack's going to survive.
It's got a limited selection of odds, ends, wires, batteries, and, oh
yeah, cell phones, which only help it sometimes. It also faces major
competitors like Best Buy (NYSE: BBY). Is there really still room for the anachronistic RadioShack in a less bubbly world?Crocs
(Nasdaq: CROX): I've never been much of a fan of Crocs, but now its
once-ubiquitous colorful clogs remind me of fads like telephone booth
stuffing or the hula hoop -- trends that can fade abruptly when people
get just a tad more serious about life. Like now.Borders
(NYSE: BGP): Sorry, but buh-bye, Borders. The competitive landscape was
intense even before the economic downturn hit. And even though it's
been trying to whittle away at its debt, its long-term debt-to-equity
ratio of 128% gives yet another reason to doubt a happy ending for this
bookseller.Sears Holdings (Nasdaq: SHLD): Customers weren't flocking into Sears even before the economy went south. Its discount retail rivals like Wal-Mart
(NYSE: WMT) are far savvier, and it seems like people have nearly
forgotten Sears exists. Sorry, Eddie Lampert fans, but Sears saw its
best days long, long ago, and the current waste being laid to the
retail landscape makes me think Sears might become a thing of the past.

Find the winners
But just because many companies will feel the heat of the downturn doesn't mean there aren't companies that will flourish.

For example, Borders may be limping along on its last legs, but Amazon.com (Nasdaq: AMZN) is showing all the signs that it's going to survive and
thrive. Not only did Amazon report a solid holiday quarter while most
retailers were reporting a very blue Christmas, but Amazon is also
doing innovative things like, say, launching the second generation of
its e-book reader Kindle. In an added bonus for these troubled times,
Amazon.com has plenty of cash -- $3.73 billion -- and negligible debt.

But Amazon.com isn't the only one. You want to look for companies
with solid management teams, excellent business models, and strong
balance sheets. That's how you'll find the best, brightest, and
strongest stocks to own for the long term.

That's what Motley Fool co-founders David and Tom Gardner look for in their Stock Advisor
investing service, and it's currently beating the market by 38
percentage points. If you'd like to see what they're recommending now,
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Alyce Lomax does not own shares of any of the companies mentioned. Best Buy, Sears Holdings, and Wal-Mart Stores are Motley Fool Inside Value selections. Amazon.com and Best Buy are Stock Advisor selections. The Fool owns shares of Best Buy. The Fool has a disclosure policy.

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