Ask Matt: Is American Airlines a good stock to buy?

ByABC News
February 14, 2012, 8:11 PM

— -- Q: Is AMR, parent of American Airlines, a good stock to buy?

A: When most investors think of penny stocks trading on the Pink Sheets, wind farm operators, energy drink makers and shell companies might come to mind.

However, due to a vicious bear market and recession, many companies that were formerly some of the nation's most fabled firms have found themselves in this position.

And one of those is the company you mention: AMR, the parent of American Airlines.

Shares of AMR have collapsed as the company has pursued Chapter 11 bankruptcy protection. These proceedings typically all but wipe out shareholders in the common stock, and so far, AMR has been no exception.

Investors who are looking to build solid long-term value from their stock portfolio are best avoiding shares of companies in bankruptcy proceedings that are trading on marketplaces like the Pink Sheets.

If you're a gambler willing to take a chance that somehow, after the Chapter 11 bankruptcy proceedings end, there will be value, you might be willing to risk all your money.

Most investors, though, should steer clear and are best sticking with shares of healthy companies that trade on exchanges including the Nasdaq or NYSE.

AMR itself cautions investors: "It should be noted that in most Chapter 11 cases, owners of equity securities receive little or no recovery of value from their investment."

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz