3 busted blue chips to sell now

The market is fighting back now, but these stocks are doomed to fail in the months ahead.

By Louis Navellier Jun 21, 2010 4:11PM

After the stock market's antics in May, things appear to be on the mend in June, with the broader market trending upward -- especially thanks to a bullish start for this week as China moves to revalue its yuan.


But a rising tide does not lift all boats. Some stocks have been pushed down for a reason after the stock market's consolidation last month, and these picks need to be trimmed from your portfolio immediately.

 

Here are the three worst blue chips, according to my latest analysis of the market:

 

Charles Schwab (SCHW) -- If you ask Chuck about his earnings performance, you might 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.

 

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, but a relatively high price-earnings ratio of 20 has caused many investors to consider this stock still overpriced despite a gut-wrenching 70% flop from its 2008 peak.

 

Transocean Ltd. (RIG) -- If you didn't already know about Transocean, the BP oil spill has opened 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 right now. Shares are off 35% since Jan. 1, with no bottom in sight.

 

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 P/E 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 you would by 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. Penny stock strategies, where big downside moves are corrected quickly, don't apply to blue chips. By nature these big companies are slow to change course. Also, among blue chips, these are not exactly high-yield dividend stocks (with the exception of Excelon's 5% yield) so there's even less reason to hang on.

Since the momentum of all three of these picks is clearly downward, that means it's time to sell.

 

For my complete list of the 10 worst blue chip stocks to sell now, follow the link.

 

As of this writing, Louis Navellier did not own a position in any of the stocks named here.

 

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