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No. of Recommendations: 11
I'm not inclined to jump on the XPO bandwagon, particularly after this acquisition. I was mildly interested in the company as an expediter/logistics handler (emphasis on "mildly"). I once worked for a customs expediter (one of my very first jobs) and understand there is money to be made in the business. But, especially with this acquisition, XPO is wading ever deeper in the freight asset business (i.e., trailers and trucks). That's a far tougher business to manage and recessions can wreak havoc.

But that's not my primary concern. I was interested enough in the company to actually read its 2014 Annual Report...something every investor should do if evaluating any investment prospect. I was decidedly underwhelmed (Mr. Thesaurus can search for other terms if he so wishes). One can access the Annual Reports from XPO's website. To simplify matters, I'll simply link to a few Yahoo summaries:

First, the Income Statement:

http://finance.yahoo.com/q/is?s=XPO+Income+Statement&ann...

XPO's net income fell from a loss of $23.3 Million in 2012 to a net income loss of $107.4 Million in 2014. Color me unimpressed.

Next, the Balance Sheet:

http://finance.yahoo.com/q/bs?s=XPO+Balance+Sheet&annual...

Net tangible assets grew from $166.6 Million in 2012 to net tangible assets of $384.3 Million in 2014. Kinda looks OK (on the surface) until you consider that total liabilities rose from $168.1 Million in 2012 to $1.1 BILLION in 2014. Equally disturbing is that "Goodwill" grew from $55.9 Million in 2012 to $929.3 Million in 2014. Anyone who has ever spent a bit o' time as an investor recognizes the perils of "Goodwill" on balance sheets.

Finally, there's the Cash Flow statement:

http://finance.yahoo.com/q/cf?s=XPO+Cash+Flow&annual

Cash flow from operating activities in 2014 is a NEGATIVE $21.3 Million. But, hey, it gets worse: cash flow LOSSES from investing activities increased from ($64.2 Million) in 2012 to a loss of ($858.3 Million) in 2014. But, XPO reported a net increase in cash and cash equivalents! How did they do that, you ask? By selling over a million dollars in stock and borrowing an additional $414.6 Million. Folks, QE (here and abroad) ain't gonna last forever. Once interest rates begin to rise, servicing those debts will grow ever more expensive.

Jim Chanos, a celebrated short-seller (whom I respect) often warns of "serial acquirers." I suggest that XPO's financials illustrate how one might make a company seem financially respectable...as long as one ignores the ever increasing goodwill, long-term debt and share dilution.

I'm a conservative investor. I'm gonna pass on XPO.

I suggest folks read the Annual Report(s) carefully before they decide for themselves.
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