3 Stocks You Should Avoid Like the Plague in 2016

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Just because some stocks had a terrible 2015 doesn’t mean they’re predetermined to log even more losses in the new year. Indeed, it’s often the case that one year’s winners become the following year’s losers, and vice versa.

3 Stocks You Should Avoid Like the Plague in 2016But that doesn’t apply to stocks that have no catalysts or nothing that value buyers want at seemingly any price. Whether it’s a crushing case of unfavorable macroeconomics or a fatally flawed business model, some stocks are poised to follow a poor year with more pain in 2016.

Naturally, there’s no shortage of such names as we kick off the new year, but some stocks particularly stand out, even if it’s through no fault of their own.

Crumbling prices for oil and other commodities are laying waste to a wide swatch of names in the energy, industrials and materials sector. A strong dollar is weighing on pretty much all U.S. multinationals.

Meanwhile, consumer spending growth remains muted.

If we’re lucky, a pickup in the labor market will help lift consumption expenditures, but even then, businesses with company-specific problems are still going to lag … and so are their shares.

With all that in mind, here are three names that stand out as stocks to avoid in 2016:

Stocks to Avoid: Caterpillar Inc. (CAT)

Stocks to Avoid: Caterpillar Inc. (CAT)Caterpillar Inc. (CAT) can’t catch a break. It made a huge acquisition in the mining industry right before the bottom fell out for everything from copper to coal. Meanwhile, other parts of its business are getting hammered from the rout in energy prices.

As the world’s biggest maker of construction and mining equipment, CAT is especially sensitive to changes in the global economy, and the outlook there isn’t particularly promising.

CAT lost 25% year-to-date and will probably take more than a year to recover.

A restructuring program improves the outlook for earnings, but they’re still expected to retreat, as is revenue. At the same time, a forward price-to-earnings multiple of 19 makes shares too pricey to lure in bargain hunters.

Stocks to Avoid: Groupon Inc (GRPN)

Stocks to Avoid: Groupon Inc (GRPN)Groupon Inc (GRPN) didn’t just have a horrid 2015, it’s struggling to survive.

Groupon is trying to make transition away from daily deals to become “a leading mobile commerce destination.”

Translation: Rather than push emailed coupons to members, GRPN wants pull customers in to select from a list of promotions to buy physical goods.

Most analysts believe that the change in strategy is the right one and will drive upside in Groupon stock if the company can pull it off. The problem has been that evidence that the change in strategy is working has been sparse and spotty.

The company had two shakeups at the C-level in as many months to end the year and slashed its outlook. Even after losing 62% in 2015, GRPN isn’t a rebound play.

It continues to prove that as bad as things get, they can always get worse.

Stocks to Avoid: Sears Holdings Corp (SHLD)

Stocks to Avoid: Sears Holdings Corp (SHLD)Sears Holdings Corp (SHLD) has been in trouble for years, and that’s set to accelerate in 2016. The brand isn’t quite broken, but it has little equity left. And, it’s not like mall traffic is going to magically stop falling.

Besides, one of the few reasons to hold SHLD stock went away when it spun off a couple hundred locations into a real estate investment trust known as Seritage Growth Properties (SRG).

And don’t forget that SHLD went ahead with the spinoff because it needed to raise cash.

SHLD lost close to 40% this year and it really has no catalysts — at least to the upside. Earnings and revenue remain in freefall.

With more liabilities than assets and negative cash flow, SHLD is on a path that can only end in bankruptcy.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/12/stocks-to-avoid-grpn-shld-cat/.

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