Making money on stocks isn't just about picking winners. It's also about avoiding stocks that can single-handedly blow up one's portfolio, as anyone who bought Nortel Networks Corp. or Bombardier Inc. at the top can attest.
With that in mind, Citigroup's global strategist Ajay Kapur yesterday unveiled his inaugural portfolio of "least preferred stocks," which features such unloveable laggards as General Motors Corp., Eastman Kodak Co. and Molson Coors Brewing Co.
These are stocks you wouldn't wish on your worst enemy.
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Mr. Kapur calls them "torpedo" stocks because they "tend to destroy the performance of a portfolio due to an unexpectedly large loss. Investors tend to remember these stocks vividly since they usually wipe out the relatively small but steady gains made by other outperformers in the portfolio."
To compile his list of the 24 losers, he examined historical data to determine which factors -- including valuations, earnings revisions, profitability trends and variation in earnings per share estimates -- best predict underperformance. He also considered subjective views of Citigroup analysts.
General Motors, whose stock has slumped this year as the auto maker lost market share, scored poorly on such measures as earnings revisions, trailing price-earnings ratio and numbers of days its stock was up versus down.
Molson Coors was singled out for having wide variability in analyst earnings estimates, poor forward 12-month earnings revisions and weak number of days the stock was up versus down. The brewer is "not well positioned for tougher industry fundamentals."
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Eastman Kodak, meanwhile, suffers from wide variation in earnings estimates and low sales growth as the company struggles to make the transition to digital from film-based photography.
The most potent predictors of underperformance were high stock valuations, poor earnings and weak price momentum, Mr. Kapur said.
Other "torpedo" stocks on the list include New York Times Co., Abbott Laboratories Ltd. and Fulton Financial Corp. Stinker stocks
Companies found on Citigroup global strategist Ajay Kapur's list of least-preferred stocks.
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U.S.
Molson Coors Brewing Co.
General Motors Corp.
Eastman Kodak Co.
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New York Times Co.
Ecolab Inc.
Europe
Davis Service Group PLC
Reed Elsevier PLC
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Boots Co. PLC
Converium
Japan
Mitsubishi Motors Corp.
Olympus Corp.
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Seino Transportation