Interview With John
A Candid Conversation with Jon Markman, Editor of Strategic Advantage and Trader’s Advantage, on stocks to dump now.
Q: Can it get any worse? We’re now officially in a bear market. The price of crude oil spiked. The fallout from the sub-prime mortgage mess continues to send shockwaves through the markets. What’s your take?
Jon Markman: December is typically one of the best months for investors. But this year it seems to be defying expectations, and just can’t get any traction or momentum. There’s unease everywhere. Investors can’t even trust things we used to take for granted, like the income statements put out by America’s biggest banks and brokerages. Even the sharpest accountants and lawyers don’t know how to value some of the stuff they own. With all this uncertainty, it’s no wonder three pros with strong long-term records told me they had unloaded most of the stocks they’d bought over the past five years.
Q: Should individual investors take their money out of stocks, too?
Jon Markman: Well, you don’t want to be jumping at ghosts. Things could turn on a dime for the better. But bears are on the prowl, and they have the necessary ammo for a sustained battle with the bulls. As that battle rages in the weeks ahead, your profits could easily turn to losses. My advice: right now you should at least have a good idea about the types of stocks that are stinkers.
Q: So you’re saying that success isn’t just about picking the right stocks. It’s also about avoiding the wrong stocks.
Jon Markman: Exactly. I’ve come to realize in my 20+ years of analyzing stocks that the "toss" pile (those stocks that didn’t make my Buy List) can be incredibly valuable to investors. Why? Because if you still own any of these positions, they’re going to lose you much more money than your good stocks will earn for you. Especially in the current environment.
Q: Do these losers ever turn around and make a nice comeback?
Jon Markman: Sure. I’m not so bold as to say that some of these names couldn’t go up over time, but my research indicates that at a minimum these positions will significantly underperform my Buy List positions. So instead of shooting yourself in the foot, you need to dump them before they do even more harm.
Q: Is it easier to pick stocks to sell than those to buy?
Jon Markman: No one can predict the future, but you can count on some groups of stocks stinking up the joint and just not rising to the challenge. To help investors avoid this, I tell the members of my Strategic Advantage and Trader’s Advantage services which stocks to avoid. Plus, as a thank you to any new members to my Strategic Advantage service, I put together a new FREE report, Stocks To Avoid For The Next 6 to 12 Months.
Q: What types of stocks did you include in the report?
Jon Markman: I chose stocks in sectors that could really disappoint investors. The individual investments that are highlighted will likely underperform the market, even if the market rallies. And if we get more bad news, they could really crash and burn. I’m strongly urging investors not to put any new money into these shaky holdings. Toss them in the trash if they still clutter your portfolio.
Q: You’ve generously agreed to give us a preview of the report. What’s first on your list?
Jon Markman: Well as you might have guessed, I just couldn’t stay away from financial stocks. Just take a look at Merrill Lynch (MER). Over the summer, they told us that their exposure to sub-prime loan failures was minimal. Then in September they said that maybe their exposure was around $4 billion, and a few weeks later they said $9 billion. Well, folks, they ain’t done yet. And you can bet other banks and brokerages are headed for the same fate.
Q: Any chance for a turnaround?
Jon Markman: Not any time soon. Merrill got into the mortgage securitization game late, so they accelerated their business of underwriting collateralized debt obligations or CDOs. Then Fitch Ratings announced at the end of October that another $36.8 billion in CDOs face downgrades, which means that banks will have to announce more write-downs in coming weeks.
Q: Are you recommending that investors dump all bank stocks?
Jon Markman: Well, I’ve identified 10 bank and brokerage stocks to get out of now. Eventually, these proud institutions with long histories at the center of modern capitalism will find a bottom and trade sideways for half a year—and they will make great bargains. But for now, mark them with an "A" for Avoid.
Q: What’s next?
Jon Markman: It’s hard not to admire the big-rig drivers. They make our economy go by transporting the goods that are the lifeblood of our economy. Yet, this is an industry in decline. Revenues, earnings and margins are plunging amid a retail slowdown.
Q: So who gets the axe in this sector?
Jon Markman: A company like YRC Worldwide (YRCW), parent of truck lines Yellow and Roadway, reported that volumes are back to 2001 levels and still falling. Higher costs are eating the company alive, and profit margins are plunging. YRC management told investors that the “unpredictability of the economy” made it impossible to provide any forecast for 2008. YRC is one of just five transportation stocks that I identify in my report.
Q: What else does Stocks To Avoid For The Next 6 to 12 Months contain?
Jon Markman: Investors will find the sectors that are in trouble and the names of 30 specific stocks they should dump immediately. I urge investors to get their copy now. The way the markets are going with inflationary concerns, oil spikes, falling prices and a devaluing dollar—the longer you stay in these rat holes, the more money you’re going to lose. It’s as simple as that.
Q: Any final words, Jon?
Jon Markman: Investors forget that a smart way to make money is to know which stocks to avoid. My new report can help. And the best part about it is that it’s free. Anyone can get Stocks To Avoid For The Next 6 to 12 Months. All I ask is that you to accept a trial subscription to my Strategic Advantage wealth-building newsletter.
Q: For those unfamiliar with it, what is Strategic Advantage?
Jon Markman: Strategic Advantage is my daily investment alert. It uses a proprietary set of screens that I created and refined over the last 15 years to find the best stocks to buy and those to avoid.
Q: How has Strategic Advantage been doing in these volatile times?
Jon Markman: Well, just to give you an example: While the market retreated from its highs and sent investors into a panic, my Strategic Advantage readers have been selling some great companies for profits. That’s right, profits—not losses—like these: 177% in Flotek, 124% in Southern Copper, 70% in Arcelor Mittal, and 137% in Genco Shipping and Trading.
Q: Seems like you take your own advice to buy only the best. What kinds of companies are you buying now?
Jon Markman: We’re still holding a number of standout companies that have weathered the storm just fine. A few of my favorites are up big: 42% in a maker of natural gas engines in just three months, 46% in a major energy company in 11 months, 92% in a consumer electronics company in 7 months, 51% in an energy services company in 16 months.
Thanks, Jon.
To learn more about Jon’s long-term holding service, Strategic Advantage, and to receive your FREE copy of Stocks To Avoid For The Next 6 to 12 Months, click here. Or if you’re interested in Jon’s more fast-paced trading service, Trader’s Advantage, click here.
