Yes, the new GDP numbers came in and the economy is showing 4.1% growth in the past quarter. It’s the biggest number in four years.
But remember, four years ago, the big number was the only one for the year. The following quarters shrunk back to the 2% area again. And this quarter may be no different.
There are a lot of one-time effects in this number that need to be examined. For example, companies are still buying back stock rather than rolling their tax refund money into buying equipment and investing in R&D. Reinvesting in the business is far more important than artificially boosting earnings with buybacks.
But there’s no doubt some sectors are starting to grow again and some companies are well positioned to take advantage. And then there are the companies in this list.
These are 10 triple-F stocks to throw away based on their Portfolio Grader ratings. Even if they’re in rising sectors, their boats are not going anywhere.
Triple-F Stocks to Sell: Hasbro (HAS)
Hasbro (NASDAQ:HAS) has been around since 1932. That means it has seen its fair share of market and economic tumult. And it wasn’t always the best stock to buy.
Such is the case now.
Its recent earnings report surprised to the upside and it does have a great collection of classic brands. It has also been refreshing its titles to keep up with the newest generation of kids (and kids at heart).
But the fact is, the industry is in transition with the bankruptcy of mega-toy retailer Toy ‘R’ Us. Toy sales are also declining due to the rise in computer and mobile gaming.
Until this all shakes out, it’s best to avoid even the best of the old-school toy companies.
Triple-F Stocks to Sell: Sears (SHLD)
Sears (NASDAQ:SHLD) is another iconic American brand. But in its case, it simply never made the transition to the changing market.
It is the textbook case of a major company that thought its brand was bigger than the consumer. By leaning on its reputation for quality at a reasonable price, it was getting out ahead of consumers who were re-prioritizing their shopping desires.
Instead of staying price competitive, it charged a premium for its brands like Craftsman. Then when that was unsustainable, it made its tools cheaper, got rid of their lifetime warranty and buried the business.
Whatever you read, there’s no way back for whatever remains of this relic of an empire.
Triple-F Stocks to Sell: Juniper (JNPR)
Juniper Networks (NYSE:JNPR) was trading at 10x what it is now – in September 2000. And that remains its high-water mark.
In 2000, JNPR was ahead of its time. It was an optical networking company as fiber optic cable was the hot new technology and the internet boom was in full swing. But even back then, its technology was years ahead of the industry’s ability to lay the cable and hook people up. One of the mantras back then when talking about stocks was, “If it doesn’t have a triple digit P/E, it’s not worth buying.”
JNPR was a poster child for that kind of stock. When the crash came, it fell very hard and has yet to regain its glory. Now there’s so much competition that it can barely stay competitive.
Its Q2 earnings report last night is a perfect example of its problems today.
Triple-F Stocks to Sell: GameStop (GME)
GameStop (NYSE:GME) is kind of like the Blockbuster of video games. At one time, it was the center of the gaming universe, as the middleman between the game companies and their audiences. It grew, built a scalable model, expanded from sea to shining sea and was the top player in the sector.
But then the second wave of gaming came. Mobile. Online. Free games.
Its model was under threat, and it continues to be under threat. While gaming is growing, like in most consumer ecommerce, middlemen aren’t valuable on either end of the transaction any longer.
GME will likely have a respite with traditional gamers, since some of them used to buy games from Toys ‘R’ Us. But for the others, GME doesn’t have the kind of pull it used to — nor will it ever again.
Triple-F Stocks to Sell: Barrick Gold (ABX)
Barrick Gold Corp (USA) (NYSE:ABX) is the largest gold mining company in the world.
Gold is off about 8% year to date. Inflation is under control. The economy is recovering and no major international incidents are brewing. All that is bad for the Midas metal … and the largest gold mining company.
Also remember that the price of gold affects the miners on a leveraged basis. It costs a fixed amount to pull gold from the ground, and when prices fall, miners’ margins are hit.
Some would say that this is a great contrarian pick — buy when things look bad. But even if you’re a contrarian, I would recommend you wait, because things will likely get worse before they get better.
Triple-F Stocks to Sell: GNC (GNC)
GNC Holdings (NYSE:GNC) reported decent earnings earlier this week … but honestly, it was more that GNC posted less disappointing numbers than analysts expected, not that it was growing its business significantly.
Same-store sales in the U.S. were off 0.4% and EBITDA was $63.5 million compared to $74.8 million for the same quarter a year ago.
Basically what’s happening is, its brick and mortar stores — its last generation revenue model — are no longer appealing to consumers. It has to transition its business to e-commerce and international sales.
It’s transitioning well, but it is still stuck with retail locations that it can’t walk away from, and those are dragging down the numbers. Also bear in mind that there is plenty of online competition for the products GNC sells and it’s kind of late to the game.
Triple-F Stocks to Sell: LG Digital (LPL)
That all sounds bullish enough.
However, it is losing money and can’t seem to bail faster than the losses mount. Part of it is that displays are becoming cheaper and that competition is hurting both LPL’s top line and bottom line. For example, the price of a 50-inch LCD display was 38% cheaper this May compared to last May, according to Reuters.
The other trouble is LPL is a South Korea-based company but has factories in China. The trade dispute between the U.S. and China is not helping its business.
The stock is off 31% year to date, and there’s no point trying to catch this falling knife.
Triple-F Stocks to Sell: Pixelworks (PXLW)
Pixelworks (NASDAQ:PXLW) is a chip and software maker focused on enhancing the picture quality on digital projections, large monitors and mobile devices.
It contracts with manufacturers of everything from mobile phones to televisions to use its chips and software to enhance the quality of a device’s image. PXLW has been around for about 20 years at this point but only has a market cap of around $120 million.
It’s a small firm in a sector that has some major competition. Also, since it is small, scalability becomes a factor when trying to compete. A big order may not mean big profits or big success. The stock is highly volatile, since it trades more off buzz and potential more than its business.
There are too many other chip stocks that have huge potential and already have significant market share to spend your money and patience here.
Triple-F Stocks to Sell: Quantum Corp (QTM)
Quantum Corp (NYSE:QTM) is a computer storage company. Its heyday, however, was around the dotcom boom and bust nearly two decades ago.
It is still a player in the storage sector, but it hasn’t been able to keep up with all the changes that have been happening since the mobile revolution hit. There are a number of smaller, more nimble firms that took market share and larger firms that were able to scale up when disk drives became a nearly vestigial technology.
The stock is off nearly 70% year to date and a new CEO has just been brought in to see if they can turn things around. Most analysts have been downgrading the stock.
There are so many better opportunities in this space, this is no time to bet on this one.
Triple-F Stocks to Sell: Build-a-Bear (BBW)
Build-A-Bear Workshop (NYSE:BBW) is a classic moment-in-time product and stock.
Founded in 1997, it was the hot ticket for thousands of kids for nearly a decade. It became a great addition to shopping malls because its entire purpose was to bring groups of kids in to build their teddy bears or other stuffed animals.
BBW likely staved off harder times for some malls since it brought in crowds of hungry, energy filled kids that helped boost food court sales and likely spawned other shopping ventures. It was also the rise of the dotcom bubble, when people had a lot more money to spend on birthday parties for a dozen kids who got to build bears at $10-$25 a pop before it gets dressed up.
Its online business is now a big part of its revenue model and it has licensing agreements with various movie studios.
But the problem isn’t really with the company efforts to stay relevant — it’s the fact that it is losing the demographic that made it so popular. New technologies and new fads are eating into its unique brand. And that’s hard to navigate.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, 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.
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