3 Blue Chips To Avoid Like The Corona
Not all blue-chip stocks are created the same…
31 states are now seeing huge daily increases in coronavirus cases.
Texas is locked down again.
Florida banned the sale of alcohol at bars and restaurants.
Miami shut its beaches before the upcoming July 4th holiday weekend.
And the counties surrounding Los Angeles California are back under coronavirus restrictions.
We thought we’d tamed this virus in March, April, and May… But we were just hiding from it in our houses.
Now that we’re going back outside, coronavirus cases are exploding… And cities and states are reimposing coronavirus restrictions.
Businesses were hammered during the first lockdown and were only beginning to recover as things opened.
But now cases are exploding again… If we lock down again things stocks, the economy, and us will be even worse.
They’ll be bad for certain stocks though.
Today I want to show you the 3 Blue Chips To Avoid Like The Corona… Because while they are blue chip stocks… Not all blue chips are created equal.
Let’s get to it…
Why To Avoid GE Like The Corona
General Electric (GE) used to be a stalwart blue-chip stock.
One that many families over the decades bought, held forever, and never even thought about selling.
But the company founded by Thomas Edison is now a shell of its former self.
In the last few years, it sold off divisions to keep up with the rapidly transforming business landscape. But it hasn’t done this well.
Its yearly revenues fell from $150.2 billion in 2010 to $93.5 billion in the last twelve months. Or a drop of 37.8% in 10 years.
Its operating margin fell from a high of 39.4% in 2011 to only 4.9% now. Or a fall of 87.6% in 9 years.
And its free cash flow production fell from 17.5% of sales in 2010 to only 2.9% in the most recent quarter of 2020.
Plus, GE also cut its dividend from a high of $0.93 per share in 2016 to just $0.04 per share in the most recent quarter.
This is a staggering decline of 95.7% in 4 years.
What’s this led to for GE shareholders in the last decade? Disaster.
If you owned GE shares from January 4th, 2010 to today on June 29th, 2020 your holding would now be down 41.5%… And this includes reinvested dividends.
A $10,000 investment in GE stock in January 2010 is now only worth $5,848… Again, including dividends.
GE was already on a steep decline before the coronavirus hit… But the impacts of the coronavirus look like it could cripple the company.
Stay away from GE stock.
Why To Avoid Bank of America Like The Corona
Another stock to avoid is Bank of America…
Frankly, I could have chosen any bank/financial stock and thrown it in here as I’ll show you later… But I chose Bank of America (BAC) because of the huge issues its dealing with…
In April it reported a 45% drop in net profit for the 1st quarter of 2020.
This happened because credit costs rose to the highest levels since 2010.
Because the company created a $4.8 billion “provision” for bad debt in the 1st quarter.
When companies create a provision for bed debt like this, the amount is charged – subtracted – from that quarter’s earnings. Doing this lowered net income substantially.
It created this provision because it expects its clients to be unable to pay this money back.
Due to the mass unemployment going on right now .
Due to the millions of people already not paying their bills .
And so on.
Fewer people paying their bills to companies, means those companies produce lower revenue and net income.
Bank of America created this provision because it expects far lower payments going forward than it got in the past.
And this is only the tip of the proverbial iceberg.
As I wrote in yesterdays articles, banks and other financial institutions are in major trouble in the coming months after The Federal Reserve’s announcement last week.
I talk about that in the following articles.
This entire industry is getting hammered now… And it’s going to get worse the longer people are unemployed and can’t pay their bills.
Stay away from this entire industry for the time being… But especially Bank of America.
Why To Avoid Exxon Mobil Like The Corona
Here’s another normally safe blue-chip stock that you should now avoid due to the coronavirus…
The entire oil industry is in flux due to the huge decrease in people driving and flying since March.
I talked about these issues in the following articles.
And with coronavirus cases skyrocketing in the US, I expect this trend to continue for a while.
Is Exxon a good value now due to tits recent share price? Possibly yes.
Keyword being possibly above.
Right now, there’s far too much uncertainty in the oil and gas industry due to factors outside of Exxon’s control for me to feel comfortable investing in this arena right now.
Stay away from Exxon stock.
We’re in historic bad times economically.
Normally in times like this you want to own the biggest, best, and safest stocks in the world.
But we’re not living in normal times. And not all blue-chip stocks are created equal.
There are various industries and stocks negatively affected by the ongoing coronavirus crisis.
But the stocks above are especially prone to issues surrounding the coronavirus.
And now that coronavirus cases are exploding nationwide this creates even more uncertainty around these companies.
Protect yourself and stay away from these 3 stocks at all costs.
If you’re looking for ideas on stocks to buy check out our recent article – 3 Stocks That Will Earn You High Returns In The Coming Depression .
Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.
Always In Your Service,