There’s an old saw on Wall Street that you don’t make a profit until you sell. Paper profits are meaningless.
But the step before amassing even those paper profits is being in the right stocks. And that is crucial, because even in a broad, sustained bull market, not all boats are lifted by the tide.
That goes for blue-chip stocks as well start-ups. As a matter of fact, it’s even more crucial to avoid troubled blue-chip stocks, since they are usually the foundational stocks of your portfolio — the buy and hold, “orphan and widow” stocks that get passed from generation to generation.
That’s why I thought it was important to share with you 10 blue-chip stocks that could wreck your retirement. Yes, there are plenty of stocks to buy and I talk about them all the time. But here I want to talk about the other side of the equation, the stocks that won’t help your portfolio any time soon.
Blue-Chip Stocks to Sell: General Electric (GE)
General Electric Company (NYSE:GE) is the bluest of the blue-chip stocks. It’s the only original Dow Jones Industrial Average stock that remains in the index. It has been around for over 150 years, a direct descendant of Thomas Edison’s vision for electrifying America.
But GE is no longer that company with bright, shining future. It’s mired in decades of expanding into markets and then trying to figure out how they mesh with other corporate gears.
Just this week it cut its dividend in half. GE had been growing its dividend every year since 1938 until 2009. Then it got back on its feet — until this week.
When this large a housecleaning takes place, it usually lasts longer and gets uglier than anyone ever expected.
Blue-Chip Stocks to Sell: American International Group (AIG)
American International Group Inc (NYSE:AIG) was one of the companies that helped fuel the financial collapse in 2008.
At the time, it was a major global commercial insurer and reinsurer. A reinsurer is basically an insurance company for insurance companies’ claims. At the time it was reinsuring many of the risky trades that were going on in the mortgage markets and the derivatives built off of them.
When the whole financial system buckled, AIG was on the hook for money to pay back the institutions it reinsured. But there wasn’t close to enough money to do it.
It has worked its way back since those dark days, with the help of the federal government, but it’s a shadow of what it used to be and its recent numbers are a reminder of that. Huge claims and a poorly performing asset portfolio are not encouraging signs.
Blue-Chip Stocks to Sell: AutoZone (AZO)
AutoZone, Inc. (NYSE:AZO) stock was a strong performer for a number of years. When the U.S. economy was weak, it meant more people were doing their own repairs on their cars and trucks, rather than paying for mechanics to do them.
It was opening stores, and same-store sales kept ratcheting up. Also, its commercial sales continued to grow as well.
But this isn’t a sexy space, and if growth goes to glowing from red hot, people lose interest in the auto parts space fairly quickly. And that means any bad news will get punished swiftly since these knee-jerk reactions are superficial and generally news-driven, not fundamental.
So it is with AZO stock. A couple of weak quarters and a mild winter have hurt the stock. And no one is interested in its growth story or its rebound now.
Blue-Chip Stocks to Sell: L Brands (LB)
L Brands Inc (NYSE:LB) was killing it between 2013 and 2016. But in the past year, the stock is down 27% and doesn’t have much in place to turn things around anytime soon.
LB is the parent company of Victoria’s Secret, Bath & Body Works and PINK brands.
Once the big traffic stops in the local mall, its brick and mortar presence is no longer much of an asset, especially with all the online competition that has moved into the space.
It just reported earnings a couple days ago and they were not inspiring. Earnings were off 29%, net income was down 18%. Same store sales were down 1% and revenue was fundamentally flat compared to the same quarter a year ago.
Never try to catch a falling knife. And LB is a falling knife right now.
Blue-Chip Stocks to Sell: Centurylink (CTL)
Centurylink Inc (NYSE:CTL) is a telecom company that has no mobile assets. It’s also about a tenth of the size of its biggest telecom competitors in the U.S.
That’s not an inspiring start, right?
Add to that CTL has had a less than impressive year retaining and attracting subscribers, so its stock is off 37% year to date and 60% over the past 5 years.
With this track record, why would anyone be interested, you may ask. Well, it’s currently throwing off a stunning 14.5% dividend. And given its reasonably solid book of legacy business, the dividend has kept it ahead of most annual losses.
But CTL stockholders are only whistling past the graveyard. The only chance Centurylink will make it back is if someone wants to buy it and even then it won’t likely go at a premium. And don’t be surprised if the dividend gets cut soon.
Blue-Chip Stocks to Sell: Goodyear (GT)
Goodyear Tire & Rubber Co (NASDAQ:GT) became the world’s largest tire company in 1919. And it maintained a commanding role in the U.S. tire industry for decades after.
But as Japanese and other Asian cars began to flood the global marketplace, GT came under significant pressure. Just like cheaper cars were attractive to consumers, cheaper tires meant domestic automakers could lower their price points on their cars, so competition increased for GT.
In 1999, Goodyear went in on an alliance with Sumitomo Rubber Industries to once again vault to the top of tire world. But even that didn’t last long.
Now, GT is in tough competition with rivals that are 3-7 times its size by market cap. And automakers are still just as focused on keeping costs down for all their inputs, including tires.
The most recent proof: Q3 net income was down almost 60% compared to the same quarter last year. And GT guided its full-year operating income 25% lower than last year’s. It looks like treading water or a buyout are the best scenarios at this point.
Blue-Chip Stocks to Sell: Under Armour (UAA)
Under Armour Inc (NYSE:UAA) stock had a graph that looked more like a hot tech stock rather than a sports footwear and clothing company.
Its rise was nothing short of stunning, and it even had Nike Inc (NYSE:NKE) looking over its shoulder for a number of years. And its story even had similar “humble beginnings” as Nike did. The founder started making long underwear for football players in his mother’s basement in Baltimore, MD.
But UAA went from high-tech training clothes to sports shoes, clothing and equipment in short order. It started moving into overseas markets that NKE had dominated for decades.
And Wall Street loved its outsized growth.
But that growth started to slow this year, and by Q3 had actually gone negative. UAA stock is off 55% year to date and its punishment is not over. The concern now is that its rapid expansion into all variety of markets has diluted the brand and lowered its perceived value.
Don’t bottom fish this one.
Blue-Chip Stocks to Sell: Fitbit (FIT)
Fitbit Inc (NYSE:FIT) is another cautionary tale about a tech company that was at the right place at the right time with the right product.
Its Fitbit fitness monitor was hot. And when FIT stock went public in mid-2015, the stock was chugging along near $50. Today, the stock is in the low $6’s.
It wasn’t that something changed with FIT, it was that it captured the zeitgeist and then all the competitors rolled in once there was a proven model. And then this small firm had to compete against the biggest sports firms, tech firms and fashion firms.
It’s still relevant to be sure. But it will likely never enjoy the kind of breakthrough moment that vaulted into the psyche of U.S. consumers.
Blue-Chip Stocks to Sell: Pandora (P)
Pandora Media Inc (NYSE:P) is one more reason that cool tech isn’t the sole reason to invest in a company. You have to do the boring work, just like any other stock.
P was a pioneer in online music subscription services. Its algorithm will play similar artists to the ones you like by “learning” what you enjoy is still one of its key strengths.
But the challenge has been how to pay artists’ royalties on all the music. And then there’s the continued competition from companies that have substantially more market reach and power.
In its heyday, a mere 3 years ago, P stock was trading around $37 a share. It now trades around $5.
As P matures, it’s going to have to figure out how it plans on surviving in this highly competitive space and stop worrying about its growth.
Blue-Chip Stocks to Sell: Teva Pharmaceutical (TEVA)
Teva Pharmaceutical Industries Ltd (ADR) (NASDAQ:TEVA) has had a very tough year. And next year isn’t looking much better.
While the leaderless generic drug firm struggled through the beginning of the year looking for a new CEO and a way to pull itself out of the tailspin it had been in as generic competition grew, the patent cliff endangered some branded drugs and generic exclusivity, things got worse in late October.
The stock hit a 17-year low in late October when it announced that it was lowering its revenue guidance for the year yet again.
Generic drugs sales are down in the U.S. — its largest market. A competitor got approval to market a multiple sclerosis drug in direct competition to a TEVA MS drug that had been under patent protection.
The bleeding hasn’t stopped here, and until it does, there’s no point in taking a change things will improve.
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.