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A Worthy Example of How to Add Values to Your Stocks (Part 1)

13 November 2007 - Features - Editor

We are accustomed to automobile companies swallowing each other up, but the acquisition of stocks from this sector by an outsider is certain to be a matter for speculation in investment circles. The most successful Japanese automobile majors are not exactly desperate for new capital flows, and would much rather that their stocks stay as they are.

Detroit, on the other hand, as indeed all of the United Kingdom, seems to be in a bottomless pit when it comes to competing for customers in their own back yards, to say nothing of foreign markets. Why should anyone buy controlling stocks of an ailing automobile company in the United States?

Any acquisition of stocks by a private equity firm is an additional reason for wonder. How do these people operate, and what are their long term objectives? The investment world has assumed that Cerberus Capital Management must have bought stocks of Chrysler only to bleed it of all available cash, but is that true? The Cerberus Management say that they buy stocks which they feel have hidden potentials. This firm, which maintains a relatively low and discreet profile, seems to have a distinctly long-term perspective. Any assessment of why Cerberus may have picked Chrysler stocks over any number of alternatives available to them is best evaluated by a discussion and review of how companies can be transformed.

Fundamentals of Turning around Stocks

A doctor who succeeds in saving the lives of critically ill patients is highly regarded; similarly, management teams that can change trends in movements of stocks are also highly prized. It is at least as credit worthy to maintain profitability and growth, as to reverse stagnation and losses, but somehow turning around corporate fortunes is more glamorous when it comes to picking your favorite stocks! Nothing can please investors more than the knowledge that stocks which they have backed in lean times have begun to yield rich dividends.

Circumstances and factors outside management control may result in steep climbs by stocks. War, pest outbreaks, and epidemics of diseases, are the kinds of unpredictable developments that bring handsome profits and growth knocking on the doors of some of the most avoidable stocks. However, the qualities and skills of management teams are put to acid tests when business performance is improved in highly competitive situations.

A Worthy Example of How to Add Values to Your Stocks (Part 2)

 


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