5 Stocks to Sell Today
Casey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I often run across headlines like these and click to another page. So much information recommending buys and sells is produced by holders (or future holders) of a stock in effort to steer the price where they want it.
When doing your own research, be sure to look at the reasons why. Are they suggesting sells just based on previous stock movement, or is there more of a substantial analysis involved? Do they mention the ratings made by notable rating firms or rely solely on sentiment?
For the benefit of the reader, I took a look at some of these stocks and pulled out the ones with legitimate arguments and reasons to sell.
With the use of GPS devices soaring, an established player like Garmin (NASDAQ: GRMN) should be out in front. Instead, Garmin, a leader when GPS mainly served pilots and boat owners, faces growing competition now that navigation chips are embedded in everything from smart phones to tablets to cameras.
Why have a bulky pieces of equipment stuck to your windshield when one is already on the dashboard of your car or in the palm of your hand? The result of this shift is a business that will hemorrhage profits. Automotive and mobile devices, together accounting for about 55% of Garmin's revenue, which fell from $1.67 billion in 2010 to $1.49 billion in 2012. This trend of continued revenue decline is expected to continue well into 2013 and beyond.
Leadership is already warning investors that revenues from the critical automotive business are likely to continue falling. Overall, revenue fell by 2% in 2012, and Garmin's earnings of $2.78 per share were far below the $3.51 per share the company made in 2010. Looking forward, EPS is expected to fall year-over-year both for 2013 and beyond. When investing EPS is like crack for investors and when you see decreasing EPS now and for the future this is the ultimate red flag.
RadioShack (NYSE: RSH) is also a curious phenomenon. From an outdated name to a horribly competitive niche of retailing, this once successful franchise may be headed for the stock graveyard. Every big-box retailer offers the same products at a cheaper price.
Investors are faced with some pretty ugly numbers when it comes to RadioShack. Last year, the company’s stock has lost 40% of its value. In comparison to an industry average of 10.20, its forward P/E is a mere 6.23, and its market cap down to less than $9 billion.
A lagging economy has already and continues to drive customers away from the higher prices of a specialized electronics store to retailers such as Wal-Mart. This also has a compounding effect, as Wal-Mart benefits from natural traffic in household goods and frequently purchased categories like clothing and groceries.
RadioShack also doesn't have any sort of survival plan setup either. The firm is riddled with headlines about closing stores as well as predicted future losses. With decreasing margins along with expected future larger year-over-year losses why waste your money in a company with such a dire outlook?
BlackBerry (NASDAQ: BBRY) should have been far out in front of the smartphone and mobile computing market. Instead, under its previous leadership, the company morphed and became a ghost of what it used to be. It seemed to simply watch as BlackBerry smartphone sales dropped 21% to 11.1 million units and revenue plunged 19% to $4.2 billion.
With recorded losses of $125 million for last quarter, its most recent release of the update for the BlackBerry PlayBook tablet’s operating system did little to stop the bleeding. Nearly all the ‘upgraded’ functions were in comparison to other tablets that are already on the market or about to come out.
Looking forward, BlackBerry is putting all of their eggs in one basket by their latest creation, the Z10. With an insanely huge price tag in excess of $1,000, consumers will likely opt for a new iPhone or Samsung. With other firms continuing to innovating and BlackBerry only offering one flagship product the firm will continue to suffer. With future profit shrinkage, future EPS decreases, and future market loss why invest?
This pick is a ‘twofer’. Both of these energy companies are losing ground based on their market positioning. Thermon Group Holdings provides engineered thermal solutions for process industries. The company also has missed earnings two consecutive quarters in a row. They are keeping insanely quiet about future improvements to the firm and their intentions to increase the bottom line. With revising EPS for the upcoming quarters down along with increased competition in Thermon's market place, I expect the stock to take a further hit.
FX Energy explores for and produces oil and gas – which could be a profitable industry. The catch is, they do so primarily in the Republic of Poland. To keep up with oil consumption, companies must constantly look for new sources of petroleum, as well as improve the production of existing wells, neither of which can be done in this region. The company has also not been aggressive in expanding into other regions as other companies have. Relying one area with limited success as evident with wild swings in the EPS each quarter including massive losses in two quarter of 2012 is not good business. FX expects to stay in Poland moving forward and will continue the same methodology of finding oil and gas that will continue to produce lack luster profits. Why invest in a company that will you lose you money in the future when their better competitors are better suited.
All of these stocks have one thing in common, which is growing competition, failing to live up to earnings expectations, lack of innovation, and failure to do what's best for the investor. I would suggest when a company fails to live up to their bottom lines then look for their competitors who are better and invest there.
Casey Walters has no position in any stocks mentioned. The Motley Fool owns shares of RadioShack. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!