There’s a lot of talk right now about the “Santa Rally,” or a bull market stretch around Christmas where Wall Street seems to get some holiday cheer. Stocks typically rally during this stretch, according to conventional wisdom.
Unfortunately, conventional wisdom doesn’t have much basis in fact. Just look at the recent data for the Dow from the last 5 years:
| Year | Dow’s Close 12/1 | Dow Close 12/31 | Dec. % Change |
| 2009 | 10,471.58 | 10,428.05 | -0.40% |
| 2008 | 8,149.09 | 8,776.39 | 7.70% |
| 2007 | 13,371.72 | 13,264.82 | -0.80% |
| 2006 | 12,194.13 | 12,463.15 | 2.20% |
| 2005 | 10,912.57 | 10,717.50 | -1.80% |
Aside from a significant rally in 2008 – coming off a fresh low in November set during the gut-wrenching months after Lehman Brothers went belly up – there’s not much to write home about when it comes to timing the market in December.
If you’ve been holding on to some underperforming stocks because you have been hoping for a Santa Rally, I have news for you – Santa isn’t real, and neither is the seasonal phenomenon.
So before you get burned any more, it’s time to pull the trigger on these 5 slumping blue chips in the industrial sector.
General Dynamics Corp. (GD)
General Dynamics Corp. (NYSE: GD) may have a wide variety of products and services, but it still belongs on my list of top industrial stocks to sell. GD specializes in business aviation, combat vehicles, weapons systems and munitions; shipbuilding design and construction, and information systems, technologies and services. General Dynamics primarily works with United States Department of Defense and the intelligence community, and also works with other government institutions, including the Department of Homeland Security. Those sound like fairly recession-proof products and services, but General Dynamics hasn’t exactly weathered 2010 well. Since late April, GD stock has dropped over -10%, compared to gains of about +2.5% for the Dow Jones and S&P 500. Sell GD now if you own it.
Lockheed Martin Corp. (LMT)
Lockheed Martin Corp. (NYSE: LMT) is a global security company involved in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products. Like GD, Lockheed is a leader in defense projects – and defense contracts – but amid criticism of a federal spending glut, Department of Defense paydays just haven’t been as plush. Year-to-date, LMT has dropped -8%. The stock started the year off strong, but is down -20% since late April. Trading at just under $70, LMT is slumping toward its 52-week low of $67.68.
Raytheon Co. (RTN)
Spot a trend? Raytheon Co. (NYSE: RTN) is a developer of products, services and solutions in defense markets; sensing, effects, command, control, communications and intelligence, and mission support, as well as the cybersecurity and homeland security markets. RTN works for government partners both domestically and internationally. 2010 has been a rough year for RTN, as the stock has fallen -13%. Like others on this list, Raytheon’s fall began in late April, and since then the stock has fallen -24%. Trading at around $45, RTN is also approaching a 52-week low.
FedEx Corp. (FDX)
FedEx Corp. (NYSE: FDX) offers a variety of services including transportation, e-commerce and business services. FedEx Express, FedEx Ground, FedEx Ground and FedEx Services are the four segments that the company operates. Since mid-April, FDX stock is down slightly compared to gains by the broader markets. While the stock has not performed as poorly as others on this list, FDX still should be sold. On the earnings front, FDX has missed earnings estimates the past two quarters, and analysts are projecting EPS of $1.11 this quarter after an actual EPS of $1.16 in the previous period.
3M Co. (MMM)
Diversified technology company 3M Co. (NYSE: MMM) operates in a variety of industries including industrial and transportation; health care; consumer and office; safety, security and protection services; display and graphics, and electro and communications. Despite having decent yearly numbers, MMM has done poorly as of late. Since late October, MMM is down -3% compared to gains by the broader markets. Likewise, analysts are predicting earnings of just $1.26, after an EPS of $1.53 was reported last month. Trading at $87.34, MMM is an expensive stock that should be sold before any more damage is done to your portfolio.
As of this writing, Louis Navellier did not own a position in any of the stocks named here.
