The only two things more important than know what to buy is when to sell and what to avoid. And sometimes those two pieces of information can be one in the same.
Even large-cap stocks fall prey to a downturn. Some can be in industries that are struggling right now and the markets hate uncertainty, so stocks will pay the price.
That isn’t to say these stocks represent bad companies, it’s just that the companies are in sectors where investors can’t tell whether the light at the end of the tunnel is an oncoming train or a way out.
Plus some of these stocks have done well over the years and its best to walk away now because they could get pummeled; and then you will have to hold them a very long time to get back to even.
So let’s take a look at seven large-cap stocks that you should sell right away. And if you don’t own them, don’t buy them!
7 Large-Cap Stocks to Sell Right Away: BHP Billiton Ltd (ADR) (BHP)
Ever since China has slowed its massive multi-year double-digit economic growth, commodities — materials that are building blocks of industrial production — have been hammered.
So it only makes sense that commodity-focused companies would not be doing very well.
BHP Billiton Ltd (ADR) (NYSE:BHP) is the world’s largest diversified mining firm. The Australia-based company does it all, from iron ore to aluminum to coal, and has mines throughout the world. In 2011, the stock was 100% higher than it is today because it was on a merger spree, looking to expand operations particularly in Australia so it could be the miner of choice for China’s booming heavy industry.
But now that China has cooled and the global economy has yet to get back on a growth track, BHP is a gigantic mining concern with a anorexic customer base.
It also has a $410 million tax dispute with Australia and Standard & Poor’s just downgraded its debt outlook to negative due to low iron ore and coal prices.
It’s going to take a lot to turn this titan back to the growth track. Stay away until that happens.
7 Large-Cap Stocks to Sell Right Away: Freeport-McMoRan Inc (FCX)
Freeport-McMoRan Inc (NYSE:FCX) is stretched across even more mineral assets than BHP — including gold, oil and natural gas.
Or put another way, it has broader exposure to even more depressed sectors than BHP.
At the end of 2010, FCX stock was almost three times more expensive than it is today. And there’s a very good chance this isn’t the bottom. There’s talk that FCX is looking to spin off its $9 billion oil and natural gas business, but that still wouldn’t help its copper and precious metals’ portfolios.
Sure, it’s a bargain here — but there’s no guarantee that it won’t become more of a bargain as the year rolls on.
In fact, most signs are pointing toward another down year for this miner.
7 Large-Cap Stocks to Sell Right Away: Royal Dutch Shell PLC (ADR) (RDS.A)
Speaking of oil and natural gas, I assume you have noticed the significant drop and subsequent rebound in oil prices in the past quarter.
Royal Dutch Shell PLC (ADR) (NYSE:RDS.A) is a leader in the oil and gas business, which means it’s not having a banner year to say the least. Granted, first-quarter earnings were good, but it has its hands full with some big issues beyond the future of oil and gas prices.
Greenpeace and other environmental advocates have made if very difficult for RDS.A to start its Arctic operations. China is tying the company’s hands there. And RDS.A is now obligated to clean up its substantial mess in Nigeria. Meanwhile, the low price for oil has meant that RDS.A has had to suspend offshore drilling operations in West Africa.
Long-term, its acquisition of BG Group will be a good thing, but not for the near future. Stay away.
7 Large-Cap Stocks to Sell Right Away: Deutsche Bank AG (USA) (DB)
Financial institutions have had a hard time since the real estate debacle in 2008. Most big U.S. banks are finally starting to get out from under all the lawsuits and federal investigations and have replenished their coffers in a new banking environment.
Even then, they’re still not paragons of strength and stability they once were.
The scary thing is, U.S. banks are doing better than most other banks in the world. And that’s especially true of European banks.
Deutsche Bank AG (USA) (NYSE:DB) has one uninspiring thing in common with another bank stock on this list: They both failed the European Central Bank’s stress test.
DB has been making headlines of late. You can consider it the JPMorgan Chase & Co. (NYSE:JPM) of Europe since it is setting records — in paying fines for misconduct.
In late April it settled a rate fixing scheme it was running for a record $2.5 billion. It’s also on the verge of settling a foreign exchange manipulation charge for another $1 or $2 billion in coming weeks.
All these problems make DB a large-cap stock to sell.
7 Large-Cap Stocks to Sell Right Away: Banco Santander, S.A. (ADR) (SAN)
The other large-cap bank stock on our list is Banco Santader, S.A. (ADR) NYSE:SAN). Like DB, SAN also failed the European Central Bank’s stress test.
And then there’s the fact that it’s a major bank in Europe — an economy that can barely stay out of recession. Add to that the European Union’s problems with Greece and there are plenty of reasons to stay away.
SAN has less corruption weighing down than DB, but its chief markets of Spain and Latin America aren’t doing wonders for its bottom line. It has big exposure in Brazil, which is imploding and many of the commodities-based markets of South America are dying now.
Yes, its 10% yield may look attractive, but you’re taking on a lot of risk. If Brazil and Argentina fall apart, there’s a good chance that dividend goes away pretty quickly.
7 Large-Cap Stocks to Sell Right Away: Las Vegas Sands Corp. (LVS)
Las Vegas has seen a lot of changes in the past 30 years or so. Ask the locals and they’ll tell you it’s gone from a gaming town to more of a tourist attraction that has gaming.
And what that means is, it’s part amusement park and part shopping mall. But when the economy is weak, people aren’t exactly in the mood to spend money to travel somewhere to spend more money.
One of those large-cap gaming stocks that is feeling the pain is Las Vegas Sands Corp (NYSE:LVS). In addition to its holdings in Las Vegas, LVS spent fortunes opening in Macau. But the entire gaming industry has seen its fortunes fall as Chinese authorities crack down on corruption there — a move that is keeping high rollers out of Macau’s casinos.
LVS also has a casino in Bethlehem, Pennsylvania — a traditional steel town in coal mining country. You can imagine how operations there are going.
LVS isn’t a bad company. It’s a good company that’s having a bad year — and that’s why you should stay away.
7 Large-Cap Stocks to Sell Right Away: Wynn Resorts, Limited (WYNN)
Wynn Resorts Ltd (NASDAQ:WYNN), the last stock on our list of large-cap stocks to sell, has a similar tale to tell as LVS. Like Las Vegas Sands, WYNN spent a fortune to put a footprint on Macau, and the investment isn’t paying off.
Casinos are a cyclical business. And when your markets are slow, the economy is weak and people are careful with their money, it’s a tough business.
WYNN stock is up 50% in the past five years, but it’s off 44% in the past year with more downside to come. It will take a long time for WYNN to recover from that drop. So why not step aside and then wait for a better price before coming back in?
There are plenty of good stocks to choose from in the meantime; there’s no point fixating on stocks that are breaking down.
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.