Author shares a personal sell list with bearish/avoid rationales for Mondelez, Zoetis, and Bright Horizons Family Solutions based on management quality, crisis handling, and reputational concerns.
MDLZ — AVOID Author places Mondelez on a personal sell list because, despite strong brands, management underperformed during the cocoa-price crisis and return on capital barely covers cost of capital. The causal mechanism is weak management capital allocation eroding the quality of the investment despite product strength. No urgency to sell now because the author believes institutional anti-AI food-and-beverage demand and expected cocoa price deflation could keep MDLZ appreciating, so the main stated risk is missing further upside.
Mondelez is a sell candidate because despite having a better suite of products (Oreo, Cadbury, Toblerone, Ritz, Chips Ahoy!, Milka, Belvita, and Sour Patch Kids), i find the management's performance during the crisis to be less than ideal.
ZTS — AVOID Author says Zoetis was a mistake and adds ZTS to the sell list because the violent pet-owner reaction to osteoarthritis drug allergic reactions was underestimated and management handled the crisis poorly. The mechanism is reputational and regulatory risk from FDA CVM complaints and loss of trust, with management's average response weakening the thesis. If not sold today, the business may go sideways or down; it is a priority sell if a better opportunity arises, while newer Derma products are not bad but leadership is the issue.
my other reason to put ZTS on the "to sell list" is because management handled the crisis in a very average manner.
BFAM — AVOID Author puts Bright Horizons on the sell list even after a 50% portfolio loss, because persistent abuse cases in the USA and UK and leadership's failure to address them head-on would have prevented the original investment. The mechanism is reputational and operational risk from abuse allegations outweighing a cheap valuation; the stock fell 20% yesterday despite guidance of $5 EPS and 9% growth implying fair value around $110-$135 versus $67. It will be a priority sell eventually if a better opportunity arises.
I asked myself, if i had found out about this company before i invested and knowing how cheap it is now, would i still invest in it ? The answer is no. So even i though i am almost -50% in BFAM in my portfolio B, i will still sell it eventually.