Some stocks appear to be doing perfectly well one moment and are suddenly on a downward trend in the next moment. Investors cannot deduce everything from a stock’s financials; they must look at the market trends and predict the direction markets and stocks will take. In this article, we shall take a look at five different companies that seem to be doing well but may be headed in the wrong direction in the near future. Defensive investors will feel at ease as we talk about our expectations of stocks that seem to be moving up, but they may become toxic for your portfolios in the future.
Hewlett-Packard (HPQ, Financial) engages in the provision of technology, software and solutions to both consumers and businesses. It has a market capitalization of $52.8 billion and the stock of the company is currently trading at around $27 per share. It generated a profit margin of 4.8% and a return on equity of 14.6%. Hewlett-Packard has seen a decrease of 7% in its quarterly revenue growth.
IBM (IBM, Financial) has a five year expected PEG ratio of 1.2 times while Hewlett-Packard has the same ratio at 1.5 times. IBM also has higher gross and operating margins of 46.9% and 20% respectively, versus Hewlett-Packard’s ratios of 23.3% and 8.4%. Hewlett-Packard hasn’t been doing well recently as it missed expectations. Even the company’s chief executive admits that turning the company around will take quite some time. Hence the stock is currently worth avoiding.
Cisco (CSCO, Financial) is a designer and manufacturer of Internet protocol based networking and related products. It has a market capitalization of $108.1 billion and the stock of the company is currently trading near yearly highs at around $20 per share. It generated a profit margin of 15.6% and a return on equity of 14.7%.
Alcatel-Lucent, S.A. (ALU, Financial) is a competitor of Cisco. Alcatel has a price-to-earnings ratio of 4.5 times, while Cisco is much more expensive with a price-to-earnings ratio of 15.6 times. Cisco also reported a price-to-sales ratio of 2.4 times, while Alcatel’s ratio was 0.3 times. This shows that Cisco is relatively more expensive. Cisco is also looking to buy Lightwire for $271 million; a move that may suppress future profits. Looking at Cisco’s earnings it can be seen that it might not be as attractive as some investors may believe.
SPDR Gold Trust (GLD, Financial) is an investment fund. Its net assets are worth around $71.25 billion and its stock is currently trading at around $172 per share. Over the last 52 weeks, the company’s stock traded between $135.23 and $185.85 per share. It is offering a year-to-date return of 11.4%.
Gold and silver stocks have seen a good year but gold is now in a dangerous position. Gold has the ability to continue its upside, but there is also a large risk that the position will be reversed. I think that the risk of investing in the gold market outweighs the expected returns.
iShares Silver Trust (SLV, Financial) is an investment fund. It net assets are worth around $10.38 billion and the company’s stock is currently trading at around $34 per share. In the last 52 weeks, its stock has traded between $26.03 and $48.35 per share. iShares Silver Trust has a year-to-date return of 19.82%.
The company has recently decreased its silver holdings by 21.15 metric tons. As we have mentioned above, silver and gold may face a reversal of positions that could leave buyers with a worse outcome than they would have bargained for. Silver trends show that its prices are falling and they are also leading gold downwards.
Renren (RENN, Financial) is a social networking giant in China. It has a market capitalization of $2.05 billion and its stock is currently trading at around $5 per share. Over the last 52 weeks, its stock traded between $3.21 and $24 per share. It generated a profit margin of negative 65.8%.
Renren’s operating margin of 5.4% is significantly smaller than that of Baidu Inc. (BIDU, Financial) at 52.3%. Renren also has a substantially high five year expected PEG ratio of 225.8 times versus Baidu’s ratio at 0.6 times. Renren’s stock is relatively more expensive than that of its peers. It has a price-to-sales ratio of 24.5 times while the industry average stands at 2.5 times. Renren’s shares have fallen substantially over the last year. It has also been downgraded by the Maxim Group Facebook’s halo effect and now Renren seems to be headed downwards.
Hewlett-Packard (HPQ, Financial) engages in the provision of technology, software and solutions to both consumers and businesses. It has a market capitalization of $52.8 billion and the stock of the company is currently trading at around $27 per share. It generated a profit margin of 4.8% and a return on equity of 14.6%. Hewlett-Packard has seen a decrease of 7% in its quarterly revenue growth.
IBM (IBM, Financial) has a five year expected PEG ratio of 1.2 times while Hewlett-Packard has the same ratio at 1.5 times. IBM also has higher gross and operating margins of 46.9% and 20% respectively, versus Hewlett-Packard’s ratios of 23.3% and 8.4%. Hewlett-Packard hasn’t been doing well recently as it missed expectations. Even the company’s chief executive admits that turning the company around will take quite some time. Hence the stock is currently worth avoiding.
Cisco (CSCO, Financial) is a designer and manufacturer of Internet protocol based networking and related products. It has a market capitalization of $108.1 billion and the stock of the company is currently trading near yearly highs at around $20 per share. It generated a profit margin of 15.6% and a return on equity of 14.7%.
Alcatel-Lucent, S.A. (ALU, Financial) is a competitor of Cisco. Alcatel has a price-to-earnings ratio of 4.5 times, while Cisco is much more expensive with a price-to-earnings ratio of 15.6 times. Cisco also reported a price-to-sales ratio of 2.4 times, while Alcatel’s ratio was 0.3 times. This shows that Cisco is relatively more expensive. Cisco is also looking to buy Lightwire for $271 million; a move that may suppress future profits. Looking at Cisco’s earnings it can be seen that it might not be as attractive as some investors may believe.
SPDR Gold Trust (GLD, Financial) is an investment fund. Its net assets are worth around $71.25 billion and its stock is currently trading at around $172 per share. Over the last 52 weeks, the company’s stock traded between $135.23 and $185.85 per share. It is offering a year-to-date return of 11.4%.
Gold and silver stocks have seen a good year but gold is now in a dangerous position. Gold has the ability to continue its upside, but there is also a large risk that the position will be reversed. I think that the risk of investing in the gold market outweighs the expected returns.
iShares Silver Trust (SLV, Financial) is an investment fund. It net assets are worth around $10.38 billion and the company’s stock is currently trading at around $34 per share. In the last 52 weeks, its stock has traded between $26.03 and $48.35 per share. iShares Silver Trust has a year-to-date return of 19.82%.
The company has recently decreased its silver holdings by 21.15 metric tons. As we have mentioned above, silver and gold may face a reversal of positions that could leave buyers with a worse outcome than they would have bargained for. Silver trends show that its prices are falling and they are also leading gold downwards.
Renren (RENN, Financial) is a social networking giant in China. It has a market capitalization of $2.05 billion and its stock is currently trading at around $5 per share. Over the last 52 weeks, its stock traded between $3.21 and $24 per share. It generated a profit margin of negative 65.8%.
Renren’s operating margin of 5.4% is significantly smaller than that of Baidu Inc. (BIDU, Financial) at 52.3%. Renren also has a substantially high five year expected PEG ratio of 225.8 times versus Baidu’s ratio at 0.6 times. Renren’s stock is relatively more expensive than that of its peers. It has a price-to-sales ratio of 24.5 times while the industry average stands at 2.5 times. Renren’s shares have fallen substantially over the last year. It has also been downgraded by the Maxim Group Facebook’s halo effect and now Renren seems to be headed downwards.
