Last week I looked at the best and worst stocks in the Dow Jones Industrial Average. This week I want to expand our search and look for the best and the worst stocks in the broader market — the S&P 500, to be specific. You know … the index that just notched an all-time record high? But all stocks in the index are not created equal. Avoiding those most likely to underperform can add to your return and protect your wealth during a volatile period in the stock market.
Cliffs Natural Resources (NYSE:CLF) remains one of the worst stocks in the S&P 500. The stock has been a disaster, off more than 70% in the past year and almost 50% in just the past three months. Advisers and pundits have been trying to bottom-fish the stock all the way down, but Portfolio Grader ranked the stock a “Strong Sell” back in August with the shares at twice the current level. Demand for iron ore and coal has been weak and is expected to remain so throughout 2013. This stock should be avoided until the fundamentals improve substantially.
Newfield Exploration (NYSE:NFX) is anther stock that has seen fundamentals deteriorate over the past year, and investors who bet on a rebound in natural gas and liquids have been hurt by the stock. The shares are down more than 35% in the past year and show no signs of turning around anytime soon. The company tried to shift to natural gas liquids as gas prices sank … but so did everyone else. As a result there is a growing supply of natural gas liquids and prices are sliding. The company is trying to sell its Malaysian operations as worsening operating conditions have caused revenues from that region to fall off sharply. This stock has been a “Strong Sell” for over a year now — and there is no change in the fundamentals in sight.
One non-energy-related stock that recently fell to an “F” grade in Portfolio Grader is General Dynamics (NYSE:GD). The company is going to be hurt by automatic spending cuts and additional looming cuts in defense spending. The U.S. government is 66% of revenues, and there is no way for the company to avoid being hurt by changes in spending policies. Avoid the stock at all costs — and sell today if you own the shares.
Identifying the worst stocks can help you avoid making serious mistakes and incurring losses that might be tough, if nor impossible, to recover in a volatile market. Stay tuned for the best S&P 500 stocks later this week.
Louis Navellier is the editor of Blue Chip Growth.