Nobody ever wants to get an “F”. If you get an “F” on a test or a paper you have pretty much whiffed the assignment. Kids who bring home an “F” on a report card know that there are repercussions and probable punishments in their near-term future.
The stock market isn’t much different. Stocks that receive an “F” from Portfolio Grader have a bleak future ahead of them in the short to intermediate term and no amount of explaining by executives or hope-filled pleadings by overly optimistic analysts is going to change that picture. Conditions might improve, but we won’t know that until we see better grades.
Until that happens, investors need to avoid these stocks at all costs.
SkyWest (SKYW) is a great example of a stock where we are promised better days ahead but the fundamentals and performance right now do not justify purchase. The regional airline has been telling analysts and investors for some time now that conditions will improve once the low-margin contracts on smaller airliners expire. That may well be true but for now they are still stuck with those contracts and results have been awful.
Revenues have been declining steadily and analysts have slashed their earnings estimates for this year and next. Investors should stay away from the shares until the results improve. Portfolio Grader downgraded SKYW stock to an “F” back in March and the fundamentals have just worsened since then. SkyWest is a “strong sell” at the current price.
KBR Inc. (KBR) is a global construction and engineering company that builds things like oil and gas facilities, liquefied natural gas and gas-to-liquids facilities, roads, pipelines and other big-ticket infrastructure projects. A persistently weak global economy means a lack of demand for KBR’s services right now.
Revenues are falling and profits have vanished for KBR, and it’s posted four consecutive negative earnings surprises. As a result, analysts have been using bright red pens to slash their earnings estimates. Portfolio Grader lowered KBR stock to an “F” back in January and conditions have gotten worse since then for this company. KBR shares are a “strong sell” right now.
Chicago-based U.S. Cellular (USM) is so much a bad company as caught between two giants in the world’s most competitive business right now. U.S. Cellular offers wireless communication services — and that business is dominated by Verizon (VZ) and AT&T (T), while dozens of other competitors such as Sprint (S) and T-Mobile (TMUS) are chasing business with aggressive pricing and discount plans.
This company has posted negative earnings surprises in three of the past four quarters and is expected to lose money this year and next. In the midst of this difficult market, Portfolio Grader downgraded USM stock to an “F” just two weeks ago — U.S. Cellular is a “strong sell” right now.
Getting an “F” in school can have unfortunate consequences, just as owning stocks with an “F” from Portfolio Grader could have dire monetary consequences. Avoid stocks with bad grades until you see improvements.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.