Word: sunbeam
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Dates: during 1990-1999
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Even in a bull market, individual stocks can tank and leave small shareholders devastated. Recent examples include the staggering 84% decline at small-appliance maker Sunbeam and a 66% drop at franchise operator Cendant, where just last week chairman Walter Forbes resigned under pressure. Both are widely held stocks, and, predictably, both now face scores of lawsuits that allege accounting fraud. Ultimately, the cases against both will become class-action affairs and so serve all who owned the stocks before their meltdown. But even if the suits succeed, the overwhelming odds--and this is true in any suit over...
...have a rule at the hedge fund that I run: sell a stock at the first whiff of accounting irregularities. This rule has kept us from losing fortunes, including those we had made in Oxford Health, Sunbeam and Waste Management, to name three recent situations where the stench of overcooked books, and a dramatic decline in stock price, followed closely behind that early whiff. When a stock gets hit because of a product glitch, or a short-term execution problem, I will consider holding on, or even buying more...
Oddly, my partner and I had just done the right thing a few weeks before, dumping Sunbeam when it first declined to talk about its sales numbers. We feared there might be a secret warehouse somewhere stuffed with unsold barbecue grills. Good worry; the stock now sits 40 points lower, and the board has pulled the plug on Chainsaw Al Dunlop. Why? A massive overstatement of sales and earnings...
...person for the job. He fixed cosmetics company Revlon in the early 1990s, and most recently was doing the same for outdoor-equipment company Coleman--both efforts on behalf of controlling shareholder Ronald Perelman. Levin's selection is no accident. On March 2, Perelman sold Coleman to Sunbeam in a stock swap, and he is now Sunbeam's second-largest investor, with a 13% stake. The largest is activist money manager Michael Price, who controls 17%. As a measure of how quickly Dunlap's career unraveled, Price only two weeks earlier had publicly, emphatically supported Dunlap. But he became...
...June 8 edition questioned Dunlap's accounting methods, and a FORTUNE article with the same date suggested that his job was in jeopardy. Another bell ringer might have been massive selling by insiders at Coleman in March, beginning only days after the company agreed to be bought by Sunbeam. The Coleman folks had to sell, or lose, their stock options. But by moving so quickly, they bolstered the view that Dunlap had grossly overpaid. Indeed, nine Coleman insiders, including Levin, cashed out 581,000 shares, according to CDA Investnet--near the post-merger peak and just ahead of the stock...