The unfortunate truth is that not all great companies make great investments. There are times during the market and economic cycle where conditions don’t favor even the very best of companies. When these great companies are out of step with the stock market, investors should stand on the sidelines.
The same is even true with iconic American companies, even amid what has been a fantastic year-to-date for U.S. equities.
Here are three true giants of U.S. industry whose stocks should be sold right now:
The question to ask concerning General Electric (GE) isn’t what does GE do, but what doesn’t GE do? General Electric has divisions that make light bulbs, jet engines, medical imaging devices and almost anything else you can think of. General Electric is a pretty accurate snapshot of the global economy … unfortunately, right now, that means it’s middling along with the slow pace of global growth.
When the U.S. economy begins to hit on all cylinders again, so will GE, but right now growth is still fairly tepid. The stock was downgraded to a “D” by Portfolio Grader this week, suggesting investors should sell their shares of this American conglomerate.
The same condition holds true for IBM (IBM). This company has dominated the computer and IT space for decades, but right now those industries are growing at a snail’s pace. IBM is one of the most innovative companies in the world with offices in 170 countries around the globe, but the pace of business is still too slow for substantial fundamental improvement.
This great company will be a great stock again at some point, but for now, investors would be wise to avoid the shares. The stock was downgraded back in May to a “D” ranking, and IBM shares have retained their “sell” recommendation since then.
So it goes with Coca-Cola (KO). The distinctive outline of a Coca-Cola bottle defines America in many foreign countries, and it is the dominant soft drink company in the world. However, sales growth will be in the low single digits for the next few years as business conditions around the world remain soft.
Right now, not enough people want to buy the world a Coke for the fundamentals to improve substantially, so expect the stock to continue to lag. KO was downgraded to a “D” this week, and thus should be avoided or sold by growth-oriented investors.
Louis Navellier is the editor of Blue Chip Growth.