While macro-related issues are a factor, it’s company-specific issues that play a more significant role in causing shares from top companies to become blue-chip stocks to sell.
Some company-specific issues can be out of management’s control. However, many of these types of issues stem from poor decisions by a company’s C-suite. For instance, management teams can focus too much on new projects or business lines that ultimately fail to come to fruition. If they do come to fruition, they have little impact on the bottom line.
Other times, management teams prioritizing financial engineering over providing the best products and services can end up in a bad situation. In these situations, a damaged reputation for the company leads to deteriorating financial performance. In turn, this affects the stock’s reputation in the eyes of the market.
These, and other management blunders, are in play with the following seven blue-chip stocks to sell. As they fall from the top of the heap due to bottom-shelf decisions, stay away.
Apple (AAPL)
Apple (NASDAQ:AAPL) shares have been bouncing back lately, following the Mag 7 component’s latest updates regarding its plans to capitalize on the generative AI growth trend. However, the key issue affecting AAPL’s price performance earlier this year hasn’t gone away.
As UBS’s David Vogt recently argued, in a research note on AAPL stock, the company is “not out of the woods yet” when it comes to weak iPhone demand in China. Yes, it may be somewhat of a stretch to say that demand weakness, at least in China, is the fault of management.
After all, it’s not just a matter of Apple losing ground in China due to the impact of local competition. Rising geopolitical tensions are undoubtedly a factor as well. That said, until Apple either shores up Chinese demand or figures out something else that can outweigh this headwind, it may be best to avoid AAPL.
Boeing (BA)
When it comes to blue-chip stocks to sell due to management blunders, Boeing (NYSE:BA) definitely belongs on that list. Shares in the aerospace giant have experienced major turbulence. As you likely know, that is due to renewed concerns about the safety of the company’s commercial aircraft.
Boeing’s management may have a game plan to assuage these concerns, but it’s arguably a long road ahead until the company rebuilds its reputation. For now, the public and the market will continue to perceive Boeing in the most negative light.
That is, as a company that prioritized stock buybacks and other types of financial engineering over R&D and aerospace engineering. That strategy may have paid off in the near term, but Boing is seemingly paying the price in the long run. While these issues have already knocked BA stock down by a third since January, stay away. The dust has yet to settle.
Clorox (CLX)
Clorox (NYSE:CLX) is a blue-chip stock and a Dividend Aristocrat, with 46 years of consecutive dividend growth. Four years from now, if the household products manufacturer continues to increase its annual dividend payouts, the stock will become a Dividend King.
Yet, while CLX stock provides steady gains from its 3.72% dividend, in recent years that has been outweighed by the stock’s poor price performance. Admittedly, much of the stock’s steep declines have been due to the company’s post-pandemic hangover. Sales of its cleaning products surged during COVID, but sales and profitability have declined since.
However, there is one bad management decision that arguably has contributed to lackluster total returns for shares. That would be inadequate operational security processes, which left it vulnerable to a cyberattack last August. The damage from this cyberattack is still affecting Clorox’s fiscal performance. Sell or avoid CLX.
Ford (F)
Compared to its Detroit Three rivals, Ford (NYSE:F) has been far more aggressive in its pivot towards producing more electric vehicles (EVs). The market may have lauded this change in focus during the height of EV mania several years ago. However, it’s clear now that Ford went too big and too fast with vehicle electrification.
In hindsight, the automaker should have pursued a different EV strategy. Perhaps one more akin to that of competitor Stellantis (NYSE:STLA). Ford’s EV transformation has resulted in it becoming behind only Tesla (NASDAQ:TSLA) in terms of market share, but Ford’s EV division is also currently losing billions.
Margin-focused Stellantis, on the other hand, has a lower market share yet its EV division is profitable. While Ford is scaling back its EV efforts until cash burn from this segment ceases to affect overall profitability, consider F stock one of the blue-chip stocks to sell.
IBM (IBM)
Earlier this year, the market had few complaints about IBM’s (NYSE:IBM) AI strategy. In fact, investors bid up shares to prices last hit nearly a decade ago, on the view that the more than century-old tech firm would benefit greatly from the gen AI revolution.
More recently, however, market participants have had second thoughts about IBM stock. Yes, some of this can be chalked up to the fact that AI mania has waned since the spring. However, investors were also disappointed with the latest results and updates to guidance.
That’s not all. As Seeking Alpha contributor Stone Fox Capital recently argued, the fact that IBM is cutting back on capital expenditures raises questions over whether the company is really poised to capitalize on the AI growth trend. Until management actions and results indicate a bona fide AI growth catalyst, consider it best to steer clear of Big Blue.
Nike (NKE)
You may think Nike (NYSE:NKE) is one of the blue-chip stocks to sell due to macro headwinds for this leader in the apparel and footwear industry. However, the impact of high inflation and a global economic slowdown aren’t the only factors driving Nike’s recent slump.
At least, that’s the view of InvestorPlace’s Marc Guberti. Earlier this month, when laying out the NKE stock bear case, Guberti pointed to another factor, one that’s well within management’s control: product innovation. Until these headwinds dissipate, the company will likely continue to deliver underwhelming revenue and earnings growth.
Past disappointment has already knocked NKE back down near its 52-week low. However, if the upcoming Paris Olympics fail to be the turnaround catalyst that management has hyped it up to be, further price declines could be in the cards. When it comes to Nike stock, just don’t buy it.
Pfizer (PFE)
Since 2023, Pfizer (NYSE:PFE) has been a value trap stock. In other words, a seemingly undervalued stock that due to poor fundamentals keeps on getting cheaper. Bottom-fishing investors have bought the dip many times with the big pharma stock, hoping they were buying in at the bottom.
Unfortunately, PFE stock has continued to trend lower. The impact of declining COVID-19 vaccine and treatment sales has yet to be outweighed by the sale of new drugs in Pfizer’s pipeline. Yes, Pfizer is trying to make up for past management missteps. A prime example is the onboarding of healthcare analyst Andrew Baum as the company’s new head of strategy and innovation.
However, as Pfizer continues to struggle to develop drug products for fast-growing markets like anti-obesity, a turnaround may still be many years in the making. For now, PFE’s poor price performance could keep countering the upside from the stock’s 5.96% dividend.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
