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Hilary Kramer: 5 US Stocks You Need To Sell Now
Aspire, Thought Leaders | 12 March 2015
By: Lim Si Jie
Articles (169) Profile

“Time is running out”, writes Hilary Kramer, quite possibly one of Wall Street’s most successful equity analysts. The investment manager with a reputation as a leading expert on today’s market said in recent update that investors need to get themselves “positioned before more big name stocks implode” in the next few months.

Here are five stocks that Hilary feels that you “simply can’t afford to have your money” languish in.

Falling Oil Prices A Bane to Sustainability

Since crude oil prices slide down from $100 to $54 per barrel, investors have been avoiding the energy industry.

1. Denbury Resources (DNR) sold enough oil last year to report EPS (Earnings Per Share) of $1. The balance sheet looked stable when the stated reserves were worth $9.7 billion when oil price was still $100.

However, revenue will most likely be reduced by half in the immediate future in view of the falling oil prices. Its current cash position of $0.05 per share would not be enough to cover the dividends, let alone pay off $6.4 billion of debt and liabilities.

2. QEP Resources (QEP) is in a similar situation with zero outstanding cash in its most recent quarterly report to cover $3 billion worth of debt. Furthermore, margins are likely take a plunge as drilling, well operations and transportation costs of roughly $18 per barrel eat into margins. This will undoubtedly translate into a substantial drag on profitability.

Weak Consumer Spending Hit Apparel Retailers

3. Michael Kors Holdings (KORS) reported solid results last year, but higher revenues came with increasing Cost of Goods Sold (COGS), resulting in lower margins. It is an ominous sign for retailers when gross margins are beginning to see the impact of markdowns taken in its retail stores while inventories are getting larger. This comes amidst the global expansion of the brand, which may mean overreaching for KORS.

4. Lululemon Athletica’s (LULU) has been looking beyond its core business for growth, moving into non-athletic apparel and kids’ clothes because of current rough conditions. In the meantime, its founder Dennis Wilson sold half of his stake last year because he did not approve of some actions of the management. His move could be perceived as an admission that the athletic wear behemoth’s glory days are over.

5. Coach (COH) is a classic case of a company trying to expand through widening its target audience. But COH is risking diluting its core brand identity in the process. COH used to be a standard-bearer of “affordable luxury” and classic chic styling.

Recent seasonal launches have been both ostentatiously wild — cartoons, fur coats, platform shoes — and priced out of reach for many young singles. Trying to reach out to younger, trendier and richer shoppers while simultaneously – though unintentionally – alienating your core audience is not the way to succeed.

For retail investors, these are the industries and specific stocks that you should definitely avoid. If you already have vested interest in these companies, maybe it is time to throw in the towel.

Worried that you might not be prepared for a possible correction in US stocks? Unsure of how a correction in the US will affect Singapore? Join Daniel Loh as he shares his insights on this and more in an exclusive workshop. Click here to register now!

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

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