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Three Stocks To Avoid.

  • Written by Syndicated Publisher No Comments Comments
    December 14, 2013

    As Pete Seeger’s musical adaptation from Ecclesiastes puts it (approximately) ‘to everything there is a season, a time to plant, and a time to reap’.

    If you planted money in these three stocks I believe it’s time to reap at least some of the profits, and if you don’t own them it’s probably wise to avoid them.

    Best Buy (BBY). 41.20

    Best Buy’s turnaround story has been impressive, making its stock one of the biggest winners this year by far. However, it looks like investor enthusiasm has gotten ahead of reality.

    Our technical indicators have turned down from their overbought levels, triggering intermediate-term sell signals.




    In the background, according to Thomson Financial, company insiders have been selling quite heavily into the strength over the last six months, with almost no buying. Institutions have also been net sellers, institutional ownership falling 4.53% over the last six months.

    And recent statements from management seem to be veiled warnings to investors, including, “We expect an increasingly promotional environment will extend well beyond the holiday season . . . if our competition is more promotional we will be too, and that will have a negative impact on our gross margins.”

    No guarantee of course, but the technical indicators are saying lower prices probably lie ahead for Best Buy, with MACD triggering its first sell signal on BBY since its buy signal in January.

    Garmin Ltd. (GRMN).

    Garmin is a well-known manufacturer of navigation systems and devices used in automobiles, boats and the aviation industry, as well as ‘hand-held’ portable units used in outdoor and fitness applications.

    It’s been a popular stock with investors since May, fueled by second and third quarter results which, although lower year-over-year, beat Wall Street’s estimates.



    However, our technical indicators have now triggered intermediate-term sell signals from their overbought zones and it looks like Garmin has topped out for now.

    On the fundamentals, Garmin does not seem to have an easy road ahead, as multiple alternatives to its products and services become available, and competition in smart-phone navigation apps, and automobile-installed navigation systems, becomes more pronounced. Garmin’s ability to charge premium prices, except in its quite well protected position in aviation and marine markets, seems to be in jeopardy.

    Morningstar has a fair value estimate on the stock of $34, which may be too pessimistic. But it does look like lower prices ahead for a while.

    Boston Scientific (BSX).

    Boston Scientific develops and manufactures minimally invasive medical devices including catheters, guide-wire systems, diagnostic endoscopy equipment and the like.

    The company’s stock has surged in 2013 in spite of only fractional gains in earnings and a continuing decline in top-line revenues. Full year sales are projected by Value Line at $7.12 billion, down from $7.24 billion in 2012 and $7.62 billion in 2011. Full year earnings are projected at $.45 a share, up from $.41 in 2012 and $.44 in 2011.

    Bearish analysts point to the company’s profitability trailing its competitors due to a high mix of lower-margin products, and worry about more competition coming in its important stent business, with Abbott Laboratories launch in Europe of a new stent technology.



    However, our negative outlook for the stock is primarily due to technical analysis, including sell signals on technical indicators that have been fairly adept at staying on the right side of the stock’s moves in the past.

    In the interest of full disclosure I do not have positions in either direction in these stocks at the present time.

    Sy Harding is president of Asset Management Research Corp, and editor of www.StreetSmartReport.com, and the free market blog, www.streetsmartpost.com. He can also be followed on Twitter @streetsmartpost 

    Sy was Timer Digest’s #1 Gold Timer for 2012 (Gold Timer of the Year) and #2 Long-Term Stock Market Timer.

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 


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