Only tough contrarians bravely buy stocks in falling markets as temporary price declines are overlooked for the prospect of longer-term gains. Others active in the market at the moment are short sellers who make money when share prices fall. You only have to look at the rolling 12-month lows versus the rolling 12-month highs to see the extent of the rout – yesterday saw 122 stocks post 12-month lows versus just five stocks trading at a 12-month high (AVM, BSN, CRW, TWE & WPG).
Whatever your market outlook, there are some stocks that are in much more trouble than others as the global financial crisis continues to play out. There are multiple reasons why companies are facing it tough including slowing consumer demand, tumbling commodities prices, competitive pressures from globalisation or the internet revolution, or in the case of Cochlear a massive recall of its star product.
Interestingly, there is a host of miners on the list of sells and downgrades including junior miners Berkeley and Kagara to big players like Newcrest and Gloucester Coal. Blue chips are starting to feature in the list as well as a weaker outlook affects target prices for companies such as CBA, Myer, Cochlear, Ten, Newscorp and the ASX. And despite haemorraging all year, Deutsche still believes there’s more downside risk for surfwear retailer Billabong.
Indeed, most commentators don’t see a bright light for retail for years to come. The only sector with a less rosy outlook is probably media.
What’s the use of a list of stocks with sell recommendations? Well, for starters, it’s important to monitor your exposure to stocks that are facing broker downgrades to determine whether you too should sell underperforming shares. Sometimes companies hit a point of no return; sometimes companies post a turnaround and share prices recover. It’s important to do your research to reach a conclusion as to whether you continue to hold on or sell.
Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.