23 Stocks to sell RIGHT NOW!

June 26, 2008

I'm not sure what world economists live in, but I wouldn't mind visiting it sometime.

The stock market got smacked around today thanks to another all-time record for oil prices. Crude briefly topped $140 a barrel for the first time ever, jumping more than $5 to close at a new high of $139.64. The Dow finished down more than 358 points to close at 11,453. It was the poorest monthly performance for the index since September 2002 and the worst June since 1962. Both corn and soybeans also jumped to record highs.

But the Federal Reserve doesn't think costlier grains and gasoline count as inflation. Excuse me! Instead, they focus on the "core rate" of inflation, which ignores food and energy. That's part of the reason why the Fed decided to leave interest rates unchanged yesterday.

In Europe, they do count food and energy, and that's why the European Central Bank has interest rates at 4%, which is double where the Fed is. In fact, the ECB will probably notch up rates 0.25% in a few weeks to fight off inflation on the other side of the Atlantic. Since the spread between rates in the U.S. and Europe is getting wider, the dollar fell again–and since most commodities are traded in dollars, a weaker greenback means…higher commodity prices!

Don't expect any rate increase from the Fed here. Remember, the Federal Reserve is a political body as much as it's an economic body and likely won't touch interest rates until after the presidential election. Meanwhile, back in the real world, higher food and energy prices are having a major impact on our economy. They've already taken their toll on key industries like aerospace, airlines, autos, financials, hotels, retailers and transports.

News Flash! Higher Prices Alter Behavior

To help you avoid some of those troubled sectors, in this week's issue I'll tell you exactly what stocks to avoid and what stocks to buy. In a minute, I'll give you the names of 23 high-profile stocks that you should sell immediately–and by immediately, I mean today! One of the stocks I'm recommending you sell is General Motors (GM). The stock was downgraded by Goldman Sachs this morning, and the shares just hit their lowest price since 1955! By contrast, the Dow is up by 25-fold since then even with today's setback.

Thanks to soaring gas prices, the auto industry is facing its worst period ever. The huge glut of trucks and SUVs is a bit difficult to explain. U.S. automakers prefer to keep churning out gas-guzzlers even when there's no demand (thanks to union contracts, it's easier to keep building than lay off employees). They figured they could unload their inventory with big sales incentives, but the reality is that domestic automakers have created an inventory nightmare. Only now is Detroit racing to switch over to more fuel-efficient vehicles.

What we're witnessing is Economics 101: Higher prices are causing consumers to change their behavior. I see it happening all around me, and I'm sure you've noticed it as well. Why hasn't GM? For example, Americans drove 4.5 billion fewer miles in April compared with April 2007. This was the fewest number of miles driven in five years!

That's only one element of a broader shift in consumer behavior. Americans are planning their spending much more carefully, such as making a single trip to Costco or Wal-Mart to fill the SUV with cheaper gas and deeply discounted items. But it's important to remember that people are still spending money–they're just being more careful with it. In order to profit as investors, we need to find the companies that are the top destinations in the mind of today's uneasy consumer.

23 Stocks to Sell

The following 23 stocks are rated D or F in my exclusive PortfolioGrader Pro stock rating tool. It's a great way to rank your current or future investments, and completely free! If you own any of these stocks that flunk the PortfolioGrader test, do not wait for earnings. Do not wait for a turnaround. Sell these stocks immediately.

Advanced Micro Devices (AMD)
Allstate (ALL)
Black & Decker (BDK)
Bristol-Myers (BMY)
CBS (CBS)
Citigroup (C)
DR Horton (DHI)
FedEx (FDX)
General Electric (GE)
General Motors (GM)
Harley-Davidson (HOG)
Home Depot (HD)
Macy's (M)
Mattel (MAT)
Merck (MRK)
Motorola (MOT)
Pfizer (PFE)
Qwest Communications (Q)
SanDisk (SNDK)
Starbucks (SBUX)
Sun Microsystems (JAVA)
Washington Post (WPO)
Xerox (XRX)

What to Do Now

Once you're free from these money-losers, it's time to put that cash in a place where it can actually grow! I strongly recommend you load up your portfolio with my favorite Emerging Growth stocks. The average stock on my Emerging Growth Buy List is growing its earnings by 150%! To see our complete Emerging Growth Buy List, sign up for your trial subscription today.

Most investment advisors are dreading this upcoming earnings season. Not me. Traditionally, our Emerging Growth stocks do best in narrow, fundamentally focused stock markets. Do you remember my recommendation of General Steel (GSI) from last week? The stock is up over 30% since then, and it was one of the handful of stocks to eke out a gain today.

I'm currently working on the July issue of Emerging Growth, which will go out to subscribers tomorrow. I'll give you a brief preview. One of my favorite stocks is an agricultural chemical play, CF Industries (CF), which is up over 150% for us in the past year. For the first quarter, earnings soared 171.6%, and I'm expecting another huge gain for the second quarter (+120%).

If you want to buy CF Industries, do it now and don't wait until it reports earnings in late July. By then, it will probably be too late. You can find my precise buying instructions for CF Industries by signing up for Emerging Growth right now.

That's all for this week. I'll have the next issue of "What's Working on Wall Street Now" next Thursday, July 3.

Sincerely,

Louis Navellier

P.S. Don't be left behind in this market. The July issue of Emerging Growth goes out to subscribers in just 24 hours. Sign up for your trial subscription today.

P.P.S. If you sign up to Emerging Growth today, I'll include my latest special report "5 Must Have Growth Stocks for 2008." This is an offer extended exclusively to loyal readers of "What's Working on Wall Street Now."