At this time of year we hear lots of talk about what we should be buying. How about telling investors what they should sell or avoid?
If I think about the best ideas I have come up with over the years, the single greatest has to be my literal pounding on the table for investors to sell stocks just before the market crumbled during the fiscal crisis of 2008.
The funny thing is I have had so many more great buying recommendations, and yet it is the sell recommendation that I remember the most.
In that spirit then I can think of one asset class I would avoid entirely in 2014:
We hear so much about bubbles and all that sort of nonsense after a strong market rally and the eclipsing of important numeric barriers like Dow 16,000 or Nasdaq 4,000 but we never hear little about the skyrocketing valuations in dividend stocks.
In 2013 many dividend stocks caught a bid and kept right on soaring throughout the year.
That makes sense given the historically low interest rate environment. In addition many dividend stocks were considered safe havens for many investors that were concerned about an economic collapse or possibly worse.
The truth is the economy is in fine shape. As the year closes out, we are getting revised economic data that shows economic growth to be even better than originally thought.
The Federal Reserve is taking action to remove monetary stimulus by reducing its bond-buying program. Most believe interest rates in 2014 will be going up.
Put it all together and dividend stocks are likely to be the single worst asset class for 2014. I can think of 3 stock names in particular that I would avoid. Keep these clunkers out of your portfolio.