Four Stocks to Avoid in 2013

Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Some companies have very promising outlooks for 2013. These are not those companies. In this article, I am going to be focusing on stocks to avoid in the new year, starting with a pharmaceutical failure.

Synageva BioPharma (NASDAQ: GEVA)

Synageva actually has a rather promising drug in the making, called SBC-102. The mystery drug targets lysosomal acid lipase deficiency, and could be a success in the future. However, it is only in phase I/II of its clinical trial process: very early on and far from being on the counters at your local pharmacy. Synageva has strategically focused on unmet medical needs so as to beat competitors, yet it doesn’t look as though 2013 will be particularly great for this pharma company, because, at a value of $1.15 billion and with only one drug in clinical trials, it seems as though Synageva has lots of their eggs in one basket. Plus, it could be a while before we hear from them again about their “promising drug.” It could even be more than years until we see this drug hit the shelves. It’s a shame for a company that did so well in 2012. However, stay away from Synageva this year.

Vector Group (NYSE: VGR)

How could I steer clear of a 10.2% dividend yield? Crazy, right? Well, as is often the case, many of the highest dividend stocks are ones to seriously avoid. In case you’ve never heard of them, which you probably haven’t, Vector Group produces over 118 variations of cigarettes through different brand names.

Seems good so far. So, why avoid them? Well, everything hasn’t exactly been picture perfect for Vector in 2012, as they saw revenue drop 4% and earnings drop a staggering 79%. What’s worse is that it could have been much worse had the company not raised the prices on one of its brands. So, as is my advice with lots of cigarette brands, stay away for 2013.

United Online (NASDAQ: UNTD)

Another high dividend stock (a 7.3% yield in this case) that I’m telling you to avoid. United Online’s revenue was also down 4% this year, and earnings per share sunk 36%. There is very little reason to have hope in this company. Look at their divisions and see what you recognize:

United Online has three divisions: Internet service companies NetZero and Juno; Social Networking cites like Classmates, StayFriends, and Memory Lane; and a company called FTD floral network. How many of these have you heard of? Yeah, neither have I. I vaguely recall seeing NetZero ads on TV about 10 years ago, but that is about the extent of my memory on any of these brands.

Pitney Bowes (NYSE: PBI)

Finally, keeping with the trend of high dividend stocks, I recommend you avoid the 13.5% yielding Pitney Bowes. The company dragged down 41% in 2012, and I doubt that a turnaround is in store for the metered-mail provider.

Unfortunately, businesses are just not mailing as much or as often as they use to, and it probably won’t change any time soon. It’s reflecting in Pitney Bowes’ stock, too. It earned $2.35 a share last year, and it looks like it will boast just $1.99 a share this year. They did bring in an executive from IBM to head the company; however, no matter who runs the company, it is a dying market for Pitney Bowes.

The Foolish Bottom Line

Regardless of yield or past results, look for these stocks to take a nose dive in 2013. There are just too many problems for these companies to overcome in the upcoming year, and as a result, they are poised to disappoint. Steer clear of these stocks for 2013.

Michael Nolan has no positions in the stocks mentioned above. The Motley Fool owns shares of United Online. 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!

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