Bad business? Blame COVID-19

Many businesses & industries were already on life support before the shutdown.

COVID simply pulled the plug.

Airlines, publishing & certain retailers were facing distress. Fragile companies with weak balance sheets are first to go. The longer the shutdown went on, the more corrosive it becomes to healthy, resilient & stable businesses.

That’s when it gets really terrifying…

COVID has caused terrible performance, unquestionably… but keep an eye out for “big bath” behaviour. “Big bath” is when companies make losses appear MUCH worse than they are so future earnings will look alot better (& improve exec bonuses).

Very common tactic during a crisis.

Right now there are companies with defunct assets, underperforming divisions, loss making entities & overvalued acquisitions on their books. Suddenly everything will get wiped out under “COVID impact”. It’s the absolute perfect smokescreen to mask historic underperformance.

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