Saturday, June 26, 2010

Trading Strategies - 10 Doomed Blue Chip Stocks to Sell Now

Aluminum Corp. of China (ACH) - This company has been suffering, down about -25% year-to-date, as aluminum priced have been sagging -- including one seven month stretch that saw a -60% decline in the metals' price.
Baxter International (BAX) - Baxter has been right on target with its earnings, but its lack of growth is the real problem. BAX stock has suffered at least three downgrades from Wall Street in the last three months.The blue chip stock has lost -27% year to date with no bottom in sight.
Charles Schwab (SCHW) - If you ask Chuck about his earnings performance, you may get some hand-wringing and embarrassed excuses. SCHW has seen its earnings slump in each of the past four consecutive quarterly reports and that is not an encouraging trend. Charles Schwab is down about -16% year-to-date.
ENI S.p.A (E) - This Rome-based integrated energy company has had a whole lot of trouble making its earnings move in a positive direction, missing the market in two of its last three reports by as much as 23%. Throw in euro zone debt fears and you can understand why this Europe blue chip is down -21% since January 1.
Exelon Corp. (EXC) - Utility companies like Exelon are seen as safe haven plays, with high dividend yields and relatively low volatility. Too bad EXC has gone against the crowd on this front, shedding -16% year-to-date. Though EXC stock has a reasonable PE ratio of around 10, I wouldn't count on a turnaround any time soon.
France Telecom (FTE) - With a market cap of $50 billion, FTE is a sizeable telecom player with almost 200 million customers. Too bad that like ENI, this Europe blue chip has been battered by debt fears in the euro zone and a lack of growth. With most analysts rating this stock a "hold" or "overweight," you should consider FTE stock a sell.
Monsanto Co. (MON) - The "frankenseed" company is having trouble maintaining its once dominant place in the agricultural sector. Not only have the comparisons to prior breakout quarters rendered recent earnings pretty shabby when held up next to these numbers, a relatively high PE ratio of 20 has caused many investors to consider this stock still overpriced despite a gut-wrenching 70% flop from its 2008 peak.
Nucor Corp. (NUE) - A mining powerhouse and big name in the steel and iron business, Nucor has waiting for a recovery in construction for what seems like an eternity. Adding insult to injury last week, major flooding forced Nucor to idle two plants in Nebraska, as well as causing the collapse of a railroad bridge that served Nucor in the area. Once the floods subside, NUE will still be taking on water. Sell this blue chip stock.
Total (TOT) - The France-based crude oil giant has been socked with the rest of the energy industry in the wake of the BP disaster, to the tune of -22% lost year-to-date. Total missed forecasts fairly significantly in its last quarterly report, and could be in for another poor showing when it reports again on July 30.
Transocean Ltd. (RIG) - If you didn't already know about transocean, the BP oil spill has opened up your eyes to this oil service company. With BP angling to hang some of the liability on Transocean for the cleanup, this is an awfully risky investment to hold on to right now. Shares are off -35% since January 1 with no bottom in sight.
Here's the complete list of these blue chip stocks to sell for easy reference:
SymbolCompany NameSectorMarket CapPortfolio Grader Grade
ACHAluminum Corp. of ChinaMetals & Mining$10.8F - Strong Sell
BAXBaxter InternationalHealth Care Equipment$25.1F - Strong Sell
SCHWCharles SchwabCapital Markets$18.4F - Strong Sell
EENI S.p.A.Oil Gas & Fuels$71.8F - Strong Sell
EXCExelon Corp.Electric Utilities$27.3F - Strong Sell
FTEFrance TelecomTelecommunications$50.2F - Strong Sell
MONMonsanto Co.Chemicals$27.5F - Strong Sell
NUENucor Corp.Metals & Mining$13.1F - Strong Sell
TOTTotal S.A.Oil Gas & Fuels$111.3F - Strong Sell
RIGTransocean Ltd.Energy Equipment$17.5F - Strong Sell
To any shareholders of these stocks afraid to lock in a loss: Simple trading strategies are often the most effective, especially when it comes to blue chips. Don't worry about PE ratios or the potential of a rebound -- just remember that even if one of these stocks jumps 5% in the next few weeks, that's only good if those returns beat the broader market. If you sell out of these picks and invest in stronger stocks, you will likely make up your lost ground faster than simply wishing and hoping for these blue chips to get back to square. Don't be emotional about the loss -- protect your portfolio and move on with your investing strategy.

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