Ten Financial Stocks to Sell

February 28, 2008

Three months ago, in an issue of "What's Working on Wall Street Now," I included a list of 10 tech stocks to sell. Let's review how well these stocks have done.

Stock	11/8 Price	2/27 Price	Gain
Advanced Micro Devices (AMD)	$12.51	$7.28	-41.80%
Micron Technology (MU)	$9.33	$7.86	-15.80%
Motorola (MOT)	$17.00	$10.88	-36.00%
QLogic (QLGC)	$14.84	$16.47	11.00%
LSI Corp (LSI)	$6.16	$5.40	-12.30%
JDS Uniphase (JDSU)	$13.38	$12.91	-3.50%
Xerox (XRX)	$16.18	$15.49	-4.30%
Symantec (SYMC)	$17.27	$17.50	1.30%
Tellabs (TLAB)	$7.94	$6.67	-16.00%
Teradyne (TER)	$11.86	$12.50	5.40%

Yikes…that's not pretty. On average, that's a loss of over 11%. I hope you took advantage of my warning and sold these stocks.

Make no mistake, this is a still rough market, and it's starting to resemble a walk through a minefield. You simply don't know where the next bomb is going to go off. Just today, Sprint Nextel reported a loss of nearly $30 billion, and Sears said that its earnings plunged 47%. To quote myself, Yikes!

Do Not Plunge Into Financial Stocks

There's a perception on Wall Street that now that the Federal Reserve is lowering interest rates, financial stocks are great buys. I strongly disagree. The disastrous fourth-quarter write-downs for the many big financial institutions were caused by the losses associated with all the ways to package and sell mortgages.

The chaos is far from over. UBS is now facing litigation from one of its big institutional clients.  Dresdner Bank recently became the latest bank to bail out its struggling structured investment vehicles (SIVs) at a possible cost of $18.8 billion.  Previously, Citigroup and HSBC committed $45 billion and $35 billion, respectively, to support their SIVs. 

I anticipate that financial stocks will continue to post losses for the next five to six quarters.  Goldman Sachs recently predicted more losses for Bear Stearns and Citigroup.  After the Fed cuts rates by 0.5% on March 18 and by 0.25% in late April, I expect that a massive refinancing boom will begin.

That's the good news.  The bad news is that it will probably take a year or more for the housing market to stabilize due to excess inventories. As a result, even better-managed banks, like Wells Fargo, will still post extraordinary write-downs every quarter for the next four or five quarters due to rising delinquencies.  This means that the exodus out of interest-rate-sensitive financial stocks will last for at least the next year.

Ten Financial Stocks to Sell Now

Given the mess that's still haunting financial stocks, this week, I wanted to give you my most recent list of 10 financial stocks to sell right now.

1. Citigroup (C)
2. Bear Stearns (BSC)
3. Legg Mason (LM)
4. Freddie Mac (FRE)
5. Moody's (MCO)
6. Washington Mutual (WM)
7. Countrywide Financial (CFC)
8. Fifth Third (FITB)
9. E*TRADE (ETFC)
10. National City (NCC)

If you own any of these stocks, I urge you to sell them as soon as you can. Personally, I love this kind of market because when investors get nervous, the kinds of high-quality stocks that I favor are in much greater demand. These are exactly the kinds of stocks I recommend in my Emerging Growth service.

I've very proud of our long-term record of thrashing the overall market. The stocks on my Emerging Growth Buy List have appreciated by more than 50-fold over the last 23 years. I also wanted to let you know that you can sign up now to Emerging Growth for one year for $995. Or if you want to test out the service, you can sign up for three months for $295.

This is an excellent time to begin your Emerging Growth subscription because I'm currently working on the March issue, and it's going to be sent out to subscribers tomorrow.

This is a crucial issue. I have six new buys including one particularly fascinating stock. This company specializes in providing satellite imagery for commercial and business uses. As you might expect, business is booming. Earnings have risen 456.7% over the past four quarters. Best of all, the shares have recently pulled back from an all-time high.

If you want to find out the name of this stock and get access to my complete Emerging Growth Buy List, I urge you to sign up today.

Sincerely,

Louis Navellier