As much as it’s important to know what to buy, it’s also crucial to know what to avoid.
Regardless of whether these are good companies in bad sectors or are just simply bad companies in good sectors is a moot point.
The bottom line is, none of these stocks show even the faintest signs of vibrant life at this point, so don’t go bottom fishing!
You shouldn’t expect that there is more upside than downside in them — they still have plenty of volatility left in them.
As the saw goes, “don’t fight the tape.” And these seven F-rated stocks are a shining example of that proverb.
If you own them, sell them. If you’re looking for something to buy, you could do a lot better than these stocks.
F-Rated Stocks to Sell: Anadarko Petroleum Corporation (APC)
One-Year Loss: 45%
There is one sector of the U.S. energy market that is getting hammered particularly hard — the exploration and production sector. Anadarko (APC), down about 40% since mid-summer, just happens to be one of the leading E&P companies in the U.S.
That means it’s no surprise that the stock is off 45% in the past 12 months. In June 2014, APC was trading around $111 a share. Today, it trades around 45. That’s quite the haircut.
Yes, oil prices rose in recent months, but there’s still far more oil out there than there is demand. Some of the rising prices are in anticipation of increased seasonal demand, as people set forth on summer and spring holidays.
Some pundits out there claim oil will hit $100 a barrel by the end of 2016, but that scenario is so unrealistic it’s hardly worth considering. The fact is, $40 a barrel oil does very little to help the drowning E&Ps make money, and oil is likely to stay at or below that range for a long time to come.
F-Rated Stocks to Sell: Greenlight Capital Re, Ltd. (GLRE)
One-Year Loss: 30.5%
Greenlight Re (GLRE) is the reinsurance firm that is controlled by famous hedge fund manager David Einhorn. This has given the firm credibility up to a point, but even that veneer has been wiped away by insurance rating agency A.M. Best Company, Inc., which downgraded GLRE to “negative watch.”
Also bear in mind that reinsurers exist so insurers, lenders and traders can hedge their risk by handing over some of their liability to firms like GLRE. It’s more than passing on risk of a hurricane hitting a city.
We’re looking at banks that hold energy companies’ loans and lines of credit as they swirl the drain. The Financial Times estimates there’s $3 trillion in potential losses in the energy patch in coming months.
Reinsurers are holding the bag on this and other aspects of trading risk that most investors don’t even know about.
F-Rated Stocks to Sell: Deutsche Bank AG (USA) (DB)
One-Year Loss: 48%
Deutsche Bank (DB) has been wrapped up in every major trading scandal in the U.S. and Europe for years now. It’s a mess. And DB has yet to figure out how to disentangle itself from all the issues it has manufactured.
Yes, it’s throwing off a nearly 5% dividend yield, but the stock has plummeted around 50% in the past year, and 70% in the past five years. That is a very bad long-term trend.
Its only saving grace is it still remains Germany’s top bank and has global exposure. But in this kind of economy, there’s little for DB to help pull itself up.
It’s in duck and cover mode, and may well be there for years to come. That is, if something worse doesn’t happen to it.
F-Rated Stocks to Sell: Arctic Cat Inc (ACAT)
One-Year Loss: 53%
Arctic Cat (ACAT) is the poster child for the economic effects of global warming on a consumer sector. Warmer winters mean shorter ski seasons. Since ACAT’s main revenue source is its snowmobiles, milder winters are not good for its bottom line.
It has tried to pivot into all-terrain vehicles in recent years, but it’s playing catch-up to major brands that are already well established and have better distribution and service channels set up.
Even if ACAT can transition and save the business, this isn’t going to be a fast-growth company anytime soon. The best you can hope for is for it not to go bankrupt.
ACAT stock is off 53% in the past 12 months and its 3% dividend can’t be trusted.
F-Rated Stocks to Sell: NRG Energy Inc (NRG)
One-Year Loss: 50%
The problems with NRG Energy (NRG) began in earnest last year when energy prices plummeted. The former CEO was undergoing a major effort transitioning the independent power producer from a coal and natural gas generated business to a renewable energy business.
The problem, however, was that energy tanked.
IPPs make their money selling energy into various markets for more than it costs to produce it. When natural gas prices fell and coal-generated energy cost rose, it severely hurt NRG.
Its renewables expansion was underway, but the company was realizing more costs than profits from this investment. The stock was in freefall.
They fired the CEO in January, which started a whole challenge. Now they have to figure out how to find the best mix of its current energy generation to make money so they can buy some time for a longer-term strategy. There’s no reason to wait for NRG to figure out what it wants to be now.
F-Rated Stocks to Sell: GoPro Inc (GPRO)
One-Year Loss: 71%
A few years ago, GoPro (GPRO) was the hottest stock on Wall Street.
And now it’s a shining example of how fickle investors can be.
The stock is off 34% in the past three months and more than 70% in the past year.
GoPro cornered a hot niche market: digital quality cameras that can be used for any action video work you can imagine, whether climbing a rock wall, skydiving, surfing or simply beach bumming. They are relatively inexpensive and easy to use.
The market took off. But once everyone who wanted one had one, it was much harder to sell them a newer model. That eats into a business model built on racking up new sales, especially when they don’t have a lot of other products to fall back on.
The the new virtual reality and augmented reality wave started gaining momentum. Now GPRO has to compete with the likes a Facebook Inc (FB) and Microsoft Corporation (MSFT). There’s no reason to get involved.
F-Rated Stocks to Sell: FMC Corp (FMC)
One-Year Loss: 29%
FMC Corp (FMC) is a diversified global chemical company. It manufactures and sells everything from agricultural herbicides and fungicides to chemicals for pharmaceuticals to food additives.
This is usually a great business when global growth is healthy and people are buying more of everything, but it becomes a very different business when growth is slow.
FMC stock sports a one-year loss of nearly 30%, and its exposure to emerging markets around the world will not help boost its beleaguered stock price.
What’s more, the growing trend toward organic and local produce will not help in developed nations. The strong dollar also hurts foreign sales margins when converted back to dollars.
Simply put, there are few places for FMC to turn for growth.
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.