3 Dow Jones Stocks to Avoid Despite Record-Breaking Numbers

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stocks to avoid - 3 Dow Jones Stocks to Avoid Despite Record-Breaking Numbers

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It’s the most hated bull market in modern history, yet here we are. With the Dow Jones Industrial Average firmly eclipsing 23,000 points, the next talking point is when we will see Dow 24,000. Thanks to the law of large numbers, “Dow 24k” is only a little more than 2% away. But even with all the fanfare, the index has a few stocks to avoid.

Bear in mind this isn’t necessarily a bad thing. If all 30 companies were enjoying robust performances in 2017, a collapsing bubble wouldn’t be far away. Indeed, for a bull market to survive, traders on the opposite side of the fence must be willing to transact. Otherwise, we’d end up with too many buyers, and not enough sellers.

Some analysts believe the Dow Jones overall is exhibiting technical signs of a market top. Having been burnt on more than one occasion for doubting the Dow, I’m hesitant on potentially repeating my mistake. Still, I do have doubts on individual names, which I reveal below.

My Dow Jones stocks to avoid list isn’t merely about poor technical performances. Rather, I’m looking at the big picture, taking into consideration whether investors will risk their capital on the company in question.

Without further adieu, here are three stocks from the Dow Jones of which I’d steer clear.

Dow Jones Stocks to Avoid: General Electric Company (GE)

Dow Jones Stocks to Avoid: General Electric Company (GE)

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Among Dow Jones stocks to avoid, General Electric Company (NYSE:GE) is simply the worst. With a year-to-date loss exceeding 36%, no other Dow 30 company comes close to GE stock and its laggardness. In fact, to date, no other organization within the illustrious index has dipped into the negative double-digit territory. Verizon Communications Inc. (NYSE:VZ) and International Business Machines Corp. (NYSE:IBM) are second and third worst, at -14.9% and -9% YTD, respectively.

I used to believe that GE stock could pull it together based on its vast array of businesses and resources. I said it before, and I’ll say it again: I was wrong. Fortunately, I changed my view prior to the horrendous slide that General Electric shares endured. On July 6, I no longer perceived the company as trustworthy. It’s had plenty of time to regroup and revamp, but nothing substantive resulted.

Since then, GE stock lost 20% of market value. On Sept. 13, I simply gave up, stating that General Electric is spiraling out of control. After a brief rally, shares again collapsed, losing 13% since my article published. At this point, we can argue the fundamentals to death. The bottom line is that long-term shareholders are in panic mode.

Don’t attempt to catch GE stock because you just might get skewered.

Dow Jones Stocks to Avoid: Exxon Mobil Corporation (XOM)

Dow Jones Stocks to Avoid: Exxon Mobil Corporation (XOM)

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Because “big oil” is steeped in the history of the Dow Jones, I hesitate to place Exxon Mobil Corporation (NYSE:XOM) on the stocks to avoid list. Nevertheless, XOM stock is one of the dogs of the Dow, currently down a little more than 7% YTD. While I don’t hate Exxon Mobil and the oil recovery story, the argument is long in the tooth.

Supporters of XOM stock will counter that the industry has learned to be profitable at currently deflated oil prices. I don’t deny that claim. However, Exxon Mobil and every oil company has paid a big price for that profitability; namely, corporate restructuring, asset divestments and layoffs. When it comes time to getting back to its previous growth trajectory, big oil faces big challenges.

Slowly but surely, the world is weaning off its fossil-fuel dependency. Look at the companies and investments of the future. People nowadays are much more excited about digital commodities, such as Bitcoin, or “next-gen” commodities like lithium. I’m not saying there’s no place for crude oil, but the popularity of companies like Tesla Inc (NASDAQ:TSLA) affirm a coming paradigm shift.

Also, let’s be practical — the dividend yield on XOM stock is 3.6% against an industry median of 5.4%. For many investors, it’s not worth the passive income if shares are going to go sideways or worse. That’s probably one of the reasons why Bloomberg reported that “only one of the company’s 20 largest investors added to their Exxon holdings during the third quarter.”

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

It’s time to take a reality check and put XOM into the stocks to avoid list.

Dow Jones Stocks to Avoid: Apple Inc. (AAPL)

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I’ve saved my most controversial Dow Jones stocks to avoid idea for last: Apple Inc. (NASDAQ:AAPL). Ordinarily, this would be a ludicrous call. Despite much criticism of shares being overly stretched, AAPL stock continues to impress. This year, the consumer-electronics firm is up nearly 50%, good enough for third place in the Dow 30.

Yet no matter how we perceive its recent success, AAPL stock is overextended. The question now is whether this rally can justify itself. Based on iPhone 8 sales, AAPL appears to be a prime candidate for a stocks to avoid list. Bullish proponents counter that customers are waiting for the upcoming iPhone X because the 8’s improvement is too marginal. If that’s the case, why bother with the 8 at all?

What few people want to talk about is that Apple is running out of ideas. As I argued earlier this year, AAPL and its rivals must contend with “peak smartphone.” The market is saturated with new devices. As previously mentioned, improvements are marginal. In turn, the financial rewards for competing in the sector are increasingly marginal. Who knows when peak smartphone will negatively impact AAPL stock, but the day will come eventually.

Finally, Apple just seems like a binary risk at this juncture. If iPhone X sales stink, surely, Apple stock will correct sharply. If not, shares will rise. But the gamble seems especially hazardous considering the “been there, done that” nature of smart devices.

Josh Enomoto is long Bitcoin.


Article printed from InvestorPlace Media, https://investorplace.com/2017/11/dow-jones-stocks-to-avoid-despite-record-breaking-numbers/.

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