What's common between American Airlines, Centurylink, Coty, Occidental Petroleum and Harley Davidson?
They are all part of our high leverage risky portfolioWhy is that? When it comes to money, we believe in one rule before all other: don't lose money. This means not only focusing on return, but understanding and managing risk tooAs such, we identified companies that:Have debt obligation that is more than 2x the market valueSuch companies have increased risk of default, but we didn't rely on just one metric. We found remarkable similarities in underlying financial metrics that verified our increased risk hypothesis!These companies saw their market price drop by -25% to -35% between 2016 and 2019. Covid-19 only made it worse! All 5 stocks fell sharply in 2020, with declines ranging between -20% and -50%This isn't surprising, considering the all 5 stocks have seen their EPS decline since 2016 despite increase in revenue. In fact, 3 out of 5 stocks have reported net loss 2 or more occasions in the last 5 yearsThat's it - that's what ties these seemingly unnatural comrades. High leverage, consistent market price decline, no signs of EPS growthThey're all part of the S&P 500, and we believe investors should exercise caution with each of them as risk is evident