[Editor’s note: “7 Failing Tech Stocks to Disconnect From Now” was previously published in February 2020. It has since been updated to include the most relevant information available.]
As we’ve all learned recently, no matter how bullish a market gets, not every stock is a winner.
That’s true even in especially strong sectors like tech. The Nasdaq Composite handily outperformed the Dow Jones Industrial Average and the S&P 500 last year, but this year is radically different. Even within so-called “strong” sectors in tech, there are companies that are having trouble.
That doesn’t mean these companies are doomed, but it does mean there are better places to put your money because downside risk to these particular stocks is increasing.
Don’t get tempted to buy into these stocks just because they’re cheap, thinking that they’ll go back up to the market trend. There still may be more downside left before they make it back.
A few of these firms are also big names that are large-capitalization, tech-heavy companies that are also names to stay away from for now. These are seven failing tech stocks to disconnect from for various reasons.
But remember, the market is much better at valuing these companies than you are. These are all “F” or “D”-rated by my Portfolio Grader.
Tech Stocks to Sell: Teradata (TDC)
Teradata (NYSE:TDC) has been around a long time, since 1979 in fact. It was the love child of the California Institute of Technology and Citibank’s advanced technology group.
When it came into being it was one of the first enterprise software analytics companies out there. It was very far ahead of its time and like International Business Machines (NYSE:IBM), it was a company that blue-chip companies turned to for help establishing more efficiencies within their growing corporate structures.
But those days are gone and a new wave of companies have entered this space as technologies have continued to mature.
In its current form, TDC provides cloud services, data warehousing, business analytics and consulting. Most of this is now provided by Amazon’s (NASDAQ:AMZN) Amazon Web Services, or Microsoft’s (NASDAQ:MSFT) Azure.
This legacy player is a shadow of its former self. And the stock is off 50% in the past year when all its competitors logged huge gains and customer growth.
Vishay Intertechnology (VSH)
Vishay Intertechnology (NYSE:VSH) is another one of those tech companies that has been around so long that it’s listed on the New York Stock Exchange as opposed to the Nasdaq.
The company’s roots go back to 1962, which makes it another first-generation player in the tech sector. Its claim to fame is metal oxide semiconductor field-effect transistors (MOSFETs). It was the first compact transistor, which allowed computing to become as pervasive and mobile as it is today. And with the latest advancements, it’ll be even more so!
However, like with all technology, it doesn’t belong to one company. In the dot-com boom, VSH stock was in its heyday. But after the crash, the stock has bobbed up and down and pretty much sits where it did 20 years ago, as new competitors have arrived to take its market share.
This isn’t as much a stock on decline as it is a stock in a coma. And its recent earnings aren’t helping that perception.
F5 Networks (FFIV)
F5 Networks (NASDAQ:FFIV) is second-generation tech firm that specializes in app-based networking and security.
A decade ago, applications were becoming the big thing as mobility became a bigger part of computing. Using your smartphone to access businesses, shop, play games and hang out on social networks was the trend. This was the real rise in FFIV stock.
And while the stock continues to grow, it’s hardly moving at the pace it once did. One of the key problems is, when apps were new, companies sought out reliable firms that could handle the networking complexities as well as the security issues that come with apps.
FFIV had built a name and reputation. But now, there are tons of app companies and more security solutions that can be integrated into apps. Plus, bigger companies now see the value in apps and have hired their own in-house staff.
Plus, FFIV is still selling its app controllers and relying on a hardware sales model rather than a subscription-based recurring revenue model. It’s planning on making the shift that causes serious disruptions in the business. It’s best to stay away at least until that transition is over.
Xilinx (NASDAQ:XLNX) is a chipmaker and designer that has been around since 1984. It was another company that got its big boost during the dot-com run when computer technology was riding its first wave. It was then that the internet became a real space for regular people to do things.
That also meant that companies could also use computers as tools to integrate all their operations for efficiency.
But after the dot-com bust, XLNX stock kind of meandered, hanging onto clients and growing its base a bit. Growth was substantial until about five years ago, when the 5G hype started.
XLNX went all in and became one of the leading companies in the sector. It’s a company with a $22.6 billion market capitalization, so this is a real player. And when it decides to focus on a potentially massive new sector, people take interest.
Unfortunately, a little more than two weeks ago, XLNX released a very dour earnings report. The company announced that due to the slower-than-expected 5G rollout, the company was cutting 7% of its workforce and reevaluating earnings going forward. Not a good time to get in. Meanwhile, my preferred 5G stocks passed my proven profitability tests for a great investment now.
Boeing (NYSE:BA) may not be what you think of as a tech company, but given its massive amount of work in cutting-edge aerospace and defense work, it’s one of the leading integrated tech companies around.
But there was a ton of trouble in the organization long before the novel cronavirus took it’s bite (and it’s not just the 737 Max issue, although that is huge, too). It’s already expecting zero sales of the Max this year. Southwest Airlines (NYSE:LUV) is pulling all its Max planes out of service, at a huge loss.
On the defense side, its refueling air tanker contract is not going well. And more internal documents are showing a callous disregard for the Federal Aviation Administration’s inspection process and even for the way some programs have been run.
One engineer was quoted in an email about the Max project: “This airplane is designed by clowns who are in turn, supervised by monkeys.”
In the meantime, its significant competitor Airbus (OTCMKTS:EADSY) is logging record amounts of orders.
Remember, these planes stay in service for decades. The business lost now doesn’t come back in a year or two. And the loss of confidence — and Boeing’s pride — will hurt sales across the board for years.
Corning (NYSE:GLW) is a glass company that has been around since 1851. Millard Fillmore was president. That’s a long time ago.
On its face, a glassmaker seems an odd choice for a tech article, since the first thing that springs to most people’s minds when they hear Corning is Corningware tempered glass measuring cups.
But it also makes Gorilla Glass, which is the glass on most mobile phones. It was Steve Jobs that went to Corning before the launch of the iPhone and cut a deal with them to make the glass front for his new phone.
While it still produces other types of glass for car windows and commercial and industrial uses, the stock price rises and falls on mobile phone sales because this is high-margin work — and plentiful. The trouble is many companies are moving to flip phones with flexible screens now. This is going to cut into GLW’s business.
It’s likely GLW stock will be around for decades to come, but that doesn’t mean its stock will be along for the tech ride all that way. I’ve found other smartphone plays (and, specifically, 5G) with better growth prospects.
General Dynamics (GD)
General Dynamics (NYSE:GD) is another big, integrated tech company that specializes in using all that tech for defense and aerospace work.
While the new defense budget was passed and allows for significant increases in funding for many projects GD works on, there is the insecurity of how final that budget is. Just this week, the White House told the U.S. Department of Defense to move several billion from weapons programs to build more of President Donald Trump’s border wall.
It’s getting a “D” rating on my Portfolio Grader for momentum at the moment. And it gets a “D” overall.
Now that doesn’t mean the company is suffering from significant issues like Boeing. On the contrary, GD remains one of the top defense contractors in the game, building two new submarines in two separate classes at once. And the U.S. Navy is looking to add significantly to its fleet over the next decade.
The point is, it’s not in a good place to buy now. There is a lot of optimism priced into defense stocks now and we’re in an election year. Whoever the Democrats choose will certainly be pegged the “anti-defense” candidate and the talking heads will focus on big defense cuts if they’re elected.
But the only party to slow down defense spending was the GOP when it enacted spending limits. Keep your powder dry on GD for now.
Instead, the companies I’m particularly keen on now are facilitating the spread of ultra-fast internet worldwide — anywhere there’s a cell tower.
The 5G Buildout Is an Incredible Opportunity for Investors Right Now
Within two years, most cell phones will be 5G enabled and be able to wirelessly handle television streaming. With 5G, we’ll have cable modem speeds on any device; no need to plug in. That’s a big deal for rural areas … the very same areas that are also key to President Donald Trump’s reelection. So, by pushing 5G over the goal line, Trump will deliver a big win for his base — and strike a blow against Chinese rivals like Huawei Technologies.
But, in the big picture, 5G is about much more than trade wars and faster downloads. Because 5G is 100 times faster than 4G, it’ll allow your internet devices to work in real time. That advancement is a game changer for tech companies.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion. This buildout is where I see opportunity with 5G stocks now.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how my 5G infrastructure play will capture more market share from the broadband cable companies.
The stock I’m targeting is enjoying an influx of big money on Wall Street, and it has strong fundamentals, too — making it an “A”-rated “Strong Buy” in my Portfolio Grader system.
When you do, you’ll see how to claim a free copy of my new investment report, The Netflix of 5G, which has full details on this company — and what makes it such a great buy now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In one recent feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.