Although I’m a big fan of stocks, there are many I wouldn’t touch with a 10-foot pole. From deeply unprofitable growth stocks that are burning through cash, to beaten down names that are beaten down for a reason, there’s much I don’t like in the world of equities. In many ways, stock picking is about finding the rare diamond in a sea of coal. With that in mind, here is one TSX stock that I would not touch with a 10-foot pole.
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AtkinsRéalis
AtkinsRéalis (TSX: ATRL), formerly known as “SNC Lavalin,” is a Canadian domestic contractor that has been involved in many serious scandals over the years. The most serious of these was the SNC-Lavalin affair, in which the company was caught bribing African officials, and the Trudeau government was accused of running a cover up for the company.
AtkinsRéalis is an established company that does a lot of important work. As an engineering contractor, it works on bridges, buildings, and other infrastructure projects. It has established relationships with government, both Canada’s and foreign countries’. It did 14% revenue growth and 1,700% earnings growth in the most recent quarter. Why, given all of these advantages, do I not like AtkinsRéalis? That’s what I will explore in the next section.
Why I don’t like it
The main reason why I don’t like AtkinsRéalis is because the company has been involved in so many scandals over the years that it’s hard to imagine it cleaning up its act. In addition to the SNC Lavalin Affair, the company has been caught up in the following scandals:
- The Kerala Electric Dam scandal. AtkinsRéalis was the contractor on this project, which was mired by corruption accusations, which led to billions in losses. Several Indian government officials were fired over this scandal.
- The Jacques Cartier Bridge scandal. AtkinsRéalis was accused of giving more than $2 billion in bribes to acquire and maintain the contract to build the bridge.
- The 2004–2011 scandal surrounding illegal political donations, some of which AtkinsRéalis gave.
- The 2011 Libya scandal, in which AtkinsRéalis was accused of defrauding that country out of $130 million.
- The McGill Arthur Porter Library kickback scandal. AtkinsRéalis was accused of being involved in illegal kickbacks tied to the construction of a library.
- The SaskPower controversy. Here, AtkinsRéalis was accused of building a carbon capture system that had serious problems leading to 60% downtime.
As you can see, AtkinsRéalis has been involved in many scandals and controversies over the years. So much so that the company appears to have a “culture of corruption.” Generally speaking, savvy investors don’t invest in companies with such issues. Warren Buffett and Charlie Munger are/were famous for avoiding shares in companies with major ethical issues. AtkinsRéalis would appear to fit that description. When a company has ethical problems, those problems can turn into legal problems, and those can turn into major costs to shareholders.
Foolish takeaway
AtkinsRéalis is an institution in Canadian industry. It wins large contracts, is a Canadian household name, and has worked on some of the biggest projects in the country. It’s not going anywhere any time soon. But for my money, the cloud of corruption that hangs over ATRL makes the stock a do not buy.
