Five Big-Name Stocks to Sell Right Now

December 4, 2008

Sell These Stocks Now!

Let’s get right to the stocks that aren’t likely to be smiling much at this time next year. All of the following stocks are rated D or F on my PortfolioGrader Pro stock-rating database. If you own any of the following stocks, my advice is to sell them immediately. Don’t wait for a turnaround with these stocks because it may never come.

The first stock is Google (GOOG). I realize this may be heresy to some, but I don’t like the stock right now. When I say that I don’t like a stock, it doesn’t mean I don’t like the company. I’ve recommended Google before, and we’ve made handsome profits (about 80% in my Blue Chip Growth letter), but I don’t see that happening at this time or at this price. What concerns me is that analysts are cutting back on their earnings forecasts. That usually comes right before a big earnings miss, and the stock market’s judgment can be swift and harsh. In July, when Google’s earnings came in a few pennies below Wall Street’s estimate, the stock promptly dropped $48 the next day. Let’s not take that risk. Sell Google.

My next stock to sell is General Electric (GE). The company may bring good things to life, but its stock ain’t one of them. GE is one of the largest companies in the world. But two months ago, the industrial giant slashed its third-quarter and full-year earnings forecasts. For now, the company has said it plans to keep its dividend in place, but I’m not sure how long that can last. Cash flow is the key, and at PortfolioGrader Pro, our cash flow rating for GE is a D. Sell GE today.

Bill Gates must be having a rough time. The software tycoon has watched shares of Microsoft (MSFT) plunge from $120 nine years ago to less than $20 today. Of course, I think Bill has enough dough on hand to get by. But for the rest of us, shares of Microsoft are a bad place for our money. I made my subscribers a 123% gain in this one in the late 1990s, and the stock gets a high mark on Return on Equity, but the Quantitative score is far too low. This tells me that there’s simply too much day-to-day risk in owning Microsoft. If you own it, dump it.

I have to confess that I love Apple (AAPL)—the company; not the stock. I can’t think of an outfit that so consistently releases brilliant products. A few years ago, we saw that Apple was going for a nice discount, and we jumped. In just three years, Blue Chip Growth subscribers made a nice 252%! But those days are long gone. Apple’s earnings momentum has taken a turn for the worst, and the volatility is through the roof. That’s not the kind of action we need. Let Apple go, but I’m going to keep a close eye on it. When Apple is a buy again, I’ll be the first to buy it.

Years from now, I think students of business will study Yahoo (YHOO) as an example of what not to do. These guys were in the perfect place to OWN the Internet. They had the brand name, the market position and a sky-high stock price. Even I took advantage of the good times when Yahoo was on the rise—locking in a 121% gain for my Blue Chip Growth subscribers. They could have done anything they wanted, but they blew it. Google, the stock I just mentioned, stole Yahoo’s future right out from under it. Then Microsoft offered to buy Yahoo for $31 a share, which was a huge premium to the going price. Yahoo said they wanted $37. Microsoft raised its offer to $33. Yahoo still wanted more. Long story short—Yahoo is now at $11. Stupid, stupid, stupid!