Sorry investors, but the garbage stock rally we saw earlier this year is coming to an end.
Going forward — especially as we kick off earnings season — quality is going to matter. The big money is done bottom-fishing for the most part. Instead, big funds capable of moving stock prices higher with their buying pressure are getting a lot more selective and focusing on only the very best companies with the very best fundamentals.
With that in mind, stocks with solid fundamentals that merit a buy or strong buy from Portfolio Grader are the ones that will capture the attention and money this earnings season.
And stocks on the other end of the spectrum should be avoided.
Many investors have been trying to pick a bottom in groups like metals and miners, but that is going to be a poor strategy this earnings season. Stocks like Pan American Silver (PAAS), Newmont Mining (NEM) and Goldcorp (GG) have terrible fundamentals right now.
The price of the shiny stuff has not improved and the economy is showing no signs of any inflationary activity that might improve demand. Most of the precious metals stocks are scoring the dreaded “Triple F” in Portfolio Grader, and are strong sells that should be avoided at all costs as we enter earnings season.
Many energy companies are getting poor scores as well and should be avoided. McDermott (MDR), for example, is a construction company that specializes in designing and executing complex platforms for the oil and gas industry.
Economic activity has pretty much ground to a halt, and this is reflected in the fundamentals of the company. The stock is a strong sell and should be avoided with new money and immediately sold if you own the shares.
Penn West Petroleum (PWE) is another energy related name that scores a “Triple F” and is a strong sell at its current price.
The bottom line is that the temptation to attempt to pick a bottom can have devastating results on your investment performance. And now more than ever, investors need to focus on the “Triple A” stocks and avoid the “Triple F” stocks at all costs.
Third-quarter earnings season will be one where the treasure separates from the garbage, so you do not want to
Louis Navellier is the editor of Blue Chip Growth.
