Are These Companies Awful or What?
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This isn't going to be a nice article. So if you own any of the companies listed herein, I apologize for everything I'm going to say. But if I could've gone back and warned myself of some of the awful holdings I've had in the past, I would've definitely done so. Consider this tough love -- these companies are still around to the best of my knowledge, so they can still salvage productive and honest operations. The question is, will they do so? Let's talk about some problems I've found with these companies.
Alliant Energy (NYSE: LNT) is an electricity and natural gas company in Iowa and Wisconsin. So far so good, I love utilities. They power a great portfolio just like they power entire cities. Unfortunately, Alliant isn't that great. I mean, it's not bad with its 9.13 ROE. I don't so much mind that the profit margins are only 7.9%. But I start to draw the line at things like 1.99% growth over the past 5 years. If you can't beat my savings account when people literally need what you provide to survive, you've got problems. I'll pass.
Fairchild Semiconductor (NYSE: FCS) is a semiconductor maker that made innovative strides in the 50s and 60s in the field of transistors and integrated circuits. Unfortunately, the mighty seems to have fallen. The past five years have seen earnings growth of 1.79%, profit margins have fallen to a weak 4.84%, and the ROE is an anemic 5.38. On top of that, Fairchild has drank the Kool-Aid on mergers and acquisitions, going on a string of them in recent years including TransSiC of Sweden and Impala Linear Corporation. Even with a lot of fresh blood they're still not growing efficiently. You can do so much better, so why settle for something that used to be great?
Paging Dr. Good Idea Poorly Executed
Hologic (NASDAQ: HOLX) develops, builds, and supplies women's health equipment for things like osteoporosis and breast cancer identification. That's pretty noble, so I want to like this company. Unfortunately, the ROE is a comatose 1.07... ouch. The profit margins are a catatonic 1.68% and the earnings growth over the past five years is limping along at 4.54%. Again, the profit margin is not beating my savings accounts. I'll pass.
Needs a Test Page
Electronics for Imaging (NASDAQ: EFII) deals with inks, format printers, and digital print controllers. If you're reading this on a piece of paper (and I can't imagine why you would be), there's a chance Electronics for Imaging had a hand in the production of the printing equipment used. EFI has won awards for some of the products it's produced for original equipment manufacturers, but unfortunately it has issues. The ROE is a runny 5.34, the profit margins are a dull and faded 4.86%, and the past five years have yielded 3.69% growth. Overall this is very sad considering EFI's market cap is only $768 million and it was only founded in 1986. This might be an example of a company with great products but without an efficient way to get them into the consumer's hands.
Summing it Up
None of the companies we talked about here are absolutely horrible. But they're also far from the awesome companies I want in my portfolio. I would strongly suggest you not go long on these companies unless you can see hope for them that I haven't seen.
I own none of the companies listed herein, thank goodness. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.