Will These 5 Stocks Tumble In 2012?
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What goes up needs to come back down and knowing when to sell a stock is one of the key qualities possessed by a wise investor. It is also important to realize when a falling stock has no more prospect of changing course in order to cut your losses and look elsewhere before the damage is too great. The market will be filled with winners and losers in 2012. Which of the following companies are on the way through perilous straits and which are safe to hold onto into 2013?
It should probably come as a surprise to most people that Abbot Laboratories (NYSE: ABT) has even gained mention here due to its steady climb on the market and strong profits in the billions, but you may want to reconsider this one. The company made $4.8 billion in 2008 and another $5.7 billion in 2009 followed by $4.6 billion in 2010. Over the past year, its stock has moved from $45 per share to $55 and everything looks perfect on paper, so what is wrong with this stock?
Abbot Laboratories is about to split into two separate companies, making now the time to get out. The announcement of Abbot’s decision to form into two publicly traded companies rather than one came in October and is due for implementation by the end of 2012. Many investors are actually thrilled by the chance to invest in one aspect of Abbot’s business and not the other now and I do believe that the two companies formed as a result will fare very well, but anyone who has a position in Abbot during the transition will be harmed.
Accenture (NYSE: ACN) is another company that could be at the end of its bullish run due to a rising cost of doing business. The company provides consulting and outsourcing services to clients in over 50 countries and has produced steady profits the past three years of $1.5 billion in 2009, $1.8 billion in 2010 and $2.3 billion in 2011 but what concerns me the most about this company is its rising costs. Its cost of doing business was nearly $19 billion in 2011 compared to $16.3 billion in 2009 and if its cost of acquiring business continues to rise, its profitability will be threatened.
Altria Group (NYSE: MO) is the owner of one of the largest tobacco producers in the United States— Philip Morris. The government’s desire to increase regulation on the tobacco industry has been known to cause worry among investors about the company’s ability to remain profitable. A recent decision to force tobacco companies to display new warning labels on their products is at the heart of recent concern, but I don’t feel it will have as much of an impact on the sale of cigarettes as anticipated. As a reformed smoker myself, I can attest to the fact that anything the government had to say about smoking went in one ear and out the other and the decision to quit had to be personal, which is why I believe Altria will continue to sell cigarettes despite the changes. I actually believe this is a great stock to hold rather than abandon a position in.
Bank of America (NYSE: BAC) is the subject of a lot of bad press lately and that has translated into closed accounts and a lack of confidence in the bank. Its shares fell from $14 per share to $7 over the last year and I don’t see a recovery anywhere in sight due to the institution being the target of Occupy Wall Street and strong competition being presented by Credit Unions, which are siphoning millions from banks with the promise of no fees and better customer service.
Political posturing in Iran could prove beneficial for oil companies that have stakes in countries outside of the Middle East, but Chevron (NYSE: CVX) is facing troubles that are both legal and logistical. It is currently appealing a court ruling in Ecuador that will force the company to pay a fine of $9.5 billion and an additional $8.6 billion if it does not apologize for environmental damage that the Ecuadorian government claims Chevron is responsible for. In addition to its legal troubles, Chevron is beginning to run out of cost efficient locations to explore for resources and must rely more on deep water drilling as it looks to the future. I believe 2012 will be a rough year for Chevron and it is about time to exit this stock.
ConocoPhillips (NYSE: COP) faces the same resource issues as Chevron, but I believe that ConocoPhillips is more equipped to handle them. Its stock also pays out a solid quarterly dividend of $0.66 per share that makes it a good keeper for dividend reinvestment plans. ConocoPhillips profits also jumped from $4.4 billion in 2009 to $11.3 billion in 2010. It reported an average of $3 billion per quarter through the first three quarters of 2011. I see nothing here to justify selling ConocoPhillips at the time and I actually believe in taking a long term position in the stock instead.
Bank of America is the most definite loser of the group and I feel that we haven’t seen the full extent of the damage that the bank will incur from the wrath of a public that is angry at banks in general, let alone the bank that announced new debit card fees at the most inopportune times imaginable. I would also get out of Abbot Laboratories and consider reinvesting in one or both of the companies that forms as a result of its split. I think Altria and ConocoPhillips will do just fine this year despite speculation but Chevron could be in deep waters. Accenture is worth a watch due to its rising costs, which haven’t yet affected its stock, but which very well could choke its ability to remain profitable in the future.
Motley Fool newsletter services recommend Accenture Ltd. and Chevron. The Motley Fool owns shares of Abbott Laboratories, Bank of America and Altria Group. IUMFool has no positions in the stocks mentioned above. 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.