Paris Hilton is many things to many people. During this time of economic strife, it’s nice to know that she is not the CEO of any publicly-traded company. The life of corporate excess may have spelt success in the 1980s…but today, it’s a symbol of entitled irresponsibility.
I say this as Paris Hilton was asked recently, by the British press, how much a pint of beer costs. She intoned $20. Not the kind of insight one is looking for from a CEO. On the other hand, you could probably convince her that minimum wage is $45 an hour.
Alas, Paris is not the only one out-to-lunch when it comes to excess and understanding the current economic climate. Wall Street is chock-full of educated CEO’s who, not knowing the price of a loaf of bread, are willing, it seems, to drive their companies into the ground. Not before receiving a government hand out and generous bonus of course.
By now, everyone has probably heard that John Thain, the former CEO of Merrill Lynch, resigned. Not long ago, Thain was credited with keeping Merrill alive long enough to be rescued. That’s the good news. The bad news…while Merrill teetered on the brink of collapse, he managed to live large; at the expense of his workers.
When John Thain became Merrill Lynch’s CEO in early 2008, he hired Michael S. Smith Design to spruce up his office suite, spending approximately $1.22 million. The list includes an $87,000 “area rug,” a $68,000 credenza, $87,000 for a pair of chairs, and a charming little wastebasket for $1,400.
Interestingly, Smith is also Michelle Obama's interior designer for the White House, which is paying him only $100,000.
While the current economic climate is not conducive to shouts of joy from most investors – it is earnings season, and a time for reflection. Now is the time to look at not just how our favorite penny stock is doing, but also to gauge its corporate responsibility. Is management tightening its belt, looking to a prosperous future, or are they on the Titanic, chilling their beverage with ice from the deck?
A few penny stock companies I’m following released their results recently. And while the results were not all stellar, their actions do certainly instill a sense of respect, stability, and security going forward.
For example, Misonix, Inc. (NASDAQ: MSON, Stock Forum) announced that third-quarter revenue climbed 5.1% year-over-year to $12.2 million. The company also swung to profitability of $194,000, from a year-ago (loss) of ($117,000). Year-to-date revenue was up 6.2% at $23.5 million. The company swung to year-to-date profitability of $514,000, or seven cents per share.
Commenting on two consecutive quarters of increased revenue and earnings, company CEO Michael A. McManus, Jr., said, “In light of the challenging global economic environment, we continue to review our cost structure and implement appropriate expense reductions. We expect to see the results of the cost reductions in our third and fourth quarters of fiscal 2009.”
Now those are encouraging words. The company has a plan to improve operations…and they actually give you a time frame. In the world of penny stocks, you can never have too much corporate and fiscal transparency.
Manitex International, Inc. (NASDAQ: MNTX, Stock Forum) announced recently that it received $6.6 million in new orders. The company also provided an update to the restructuring activities commenced in the third quarter of 2008.
Andrew Rooke, MNTX President and COO, commented, “Anticipating the impact of economic conditions and longer sales cycles, we determined that swift additional management action was necessary to ensure we balance operating activity with current demand levels.”
Since the end of the third quarter 2008, MNTX has implemented across the board cost reduction activities that the company estimates will yield approximately $5 million in annual expense reductions.
The specific actions include: a headcount reduction of salaried and hourly employees, virtual elimination of overtime, reduction in executive and salaried pay, bonus and benefits and the introduction of shortened workweeks.
A difficult decision, yes, but a necessary adjustment going forward. And, lest you think MNTX is just plugging an expanding hole, in November, the company said third-quarter revenue was up 7.3% at $28.5 million. Earnings slipped to $306,000, or three cents per share.
Against the backdrop of a challenged North American market, strong operations, and recent acquisitions helped MNTX diversify their portfolio and experience healthy gains. Again, healthy signs of corporate responsibility.
While some penny stock, mid cap and large cap stocks will be banking on the success of the $789 billion economic stimulus plan, nothing is for certain. In light of a government safety net, I’m more inclined to look for penny stock companies that can adapt to the current challenges…and penny stock companies that are willing to make tough decisions.
Will the stimulus work? No one can say for certain. A progressive, forward looking management team willing to implement cost cutting measures and enact a strategic acquisition plan may be a better idea to hang your hat on.
And that’s worth a lot more than a kick at the $1,400 can.
