For the U.S. economy, 2014 was a good year, and a fine year for the stock market as well. The benchmark S&P 500 index is up about 12% — a few percentage points better than the average 9.6% annualized returns the index enjoyed between 1928 and 2013.
But in order for investors and their portfolios to make the most of the improving economy, investors need to ditch their losers. The following three stocks are all long-term losers that threaten to drag down your portfolio’s returns if they aren’t discarded.
Each of these three companies have glaring problems that no investor should want to deal with. So without further ado, here are the three doomed stocks investors should sell now.
3 Stocks to Sell Now: Crocs, Inc. (CROX)
Market Capitalization: $988 million
YTD Return: -24%
While I feel strongly that playing slots is a better investment than buying shares of Crocs, Inc. (CROX) stock, I will cede the Niwot, Colorado, footwear company this much: it will forever be remembered as the company that made those awful sandal-esque shoes with big holes in them.
But having gaping holes in the footwear wasn’t enough for Crocs. Crocs also had to make them in colors that would offend the most flamboyantly neon signage on the Vegas Strip.
Unfortunately, CROX stock has been pummeled in 2014 as investors awoke from their dream states to find they’d valued a faddish shoe company at more than $1 billion.
Ever since 2011, the fad has been dying. In 2012, sales growth fell from 26% to 12%. The next year, sales growth halved again, falling to 6% year-over-year. In 2014, sales growth came in at a meager 0.5%. And next year, revenue is projected to decline by 3%.
The struggle is real with Crocs. CROX is definitely a stock to sell as we head into 2015.
3 Stocks to Sell Now: Sears Holdings Corp (SHLD)
Market Capitalization: $3.5 billion
YTD Return: -30%
While some retailers have bounced back lately on hopes of strong holiday spending, don’t expect the troubled Sears Holdings Corp (SHLD) to share in that success.
Falling sales are a way of life at Sears. Though its recent earnings report wasn’t quite as bad as predicted, it did post its 15th consecutive quarterly loss and a nearly 13% drop in revenue to prove just how bad things still despite a long track record of underperformance.
No wonder the shares are down more than 30% since January, and more than 60% from their 2012 peak.
As James Brumley recently pointed out on InvestorPlace.com, gross margins declined again and selling/administrative expenses edged higher, indicating that “SHLD stock owners aren’t really any closer to a recovery than they’ve been at any point in the last several years, despite the relatively rosy picture Eddie Lampert continues to paint.”
It’s worth noting that beyond the recent news of weak margins and rising costs the core business of SHLD continues to steadily decay. Consider the following figures from SEC filings, under the line item of “merchandise sales and services.”
• Q3 2014: Kmart sales of $2.71 billion, Sears domestic sales of $3.89 billion
• Q3 2013: Kmart sales of $2.92 billion, Sears domestic sales of $4.42 billion
• Q3 2012: Kmart sales of $3.09 billion, Sears domestic sales of $4.72 billion
Clearly, the antics by Lampert to divest Sears of underperforming assets and raise capital for restructuring haven’t stopped the bleeding or improved the trajectory of the core big-box retail arm of Sears Holdings.
Don’t be fooled by the fact that Lampert keeps digging into his own pocket to lend Sears hundreds of millions of dollars. This is a struggling company that is going nowhere, and is not worth your money as an investment at these levels.
3 Stocks to Sell Now: BlackBerry Ltd (BBRY)
Market Capitalization: $5.3 billion
YTD: +43%
BlackBerry Ltd (BBRY) just had a big week, launching its much-anticipated BlackBerry Classic and surprising Wall Street with a small profit in its third-quarter earnings.
Wall Street has bid up shares about 6% in the last five trading days as a result, but investors shouldn’t be fooled into thinking this stock is back. BlackBerry is still an incredibly risky investment that’s not worth your money in 2015.
Consider that UBS analyst Amitabh Passi recently told Barron’s, “We expect shares to remain volatile given the upcoming newsflow, with bouts of euphoria followed by periods of disillusionment.” That sounds about right, though a 6% rise in a week is hardly euphoria in my book.
More like “false hope” if you ask me.
UBS also reiterated a “neutral” rating and a $9.50 price target on BlackBerry stock — 10% below current levels.
Remember, BlackBerry has pinned its hopes on a throwback smartphone that is embracing the nearly decade-old tactile key technology — with a price tag of $450! Maybe there are a few believers willing to pony up the cash, but this is hardly a phone with widespread appeal.
Furthermore, the phone’s boxy screen dimensions mean that many existing apps on Android and iPhone marketplaces won’t translate, and that BlackBerry will once again be peddling a platform without the most in-demand software that its competitors offer.
There are serious doubts about BBRY given these limitations of the BlackBerry Classic, and holders of BBRY stock don’t have much margin for error as a result.
Given this tech company’s history of false hope and volatility, then, I would advise steering clear of this embattled smartphone brand.
John Divine is an assistant editor at InvestorPlace.com. As of this writing, he held no positions in any of the aforementioned stocks. You can follow him on Twitter at @divinebizkid.
