December has historically been a good month for the stock market, but there are plenty of individual stocks that don’t look like attractive bets as we near the end of the year. While these stocks can be found in all sectors and may have their own unique risk factors, there are two issues that investors should be particularly mindful of: indebtedness – whether corporate or consumer – and the prospect of higher interest rates. Here are nine stocks to avoid in December:
Ford Motor Company (NYSE: F) does have good Decembers sometimes, but less often than most household name stocks. The real reason to avoid Ford in 2016, along with other major automotive companies like General Motors Company (NYSE: GM), is that its current business model is built on pyramiding consumer debt. This is all well and good as long as interest rates are close to zero, but as soon as inflation heats up and the Federal Reserve has to raise interest rates faster, the whole pyramid could topple. But if you believe inflation will never tick up again, by all means, buy Ford.
Caesars Entertainment Corp. (NASDAQ: CZR) is a classic case of what happens when you have too much debt. This troubled casino has been involved in a legalistic shell game of trying to hide its assets from its creditors. Before it declared bankruptcy, it shifted its valuable assets to an affiliated entity that its bondholders had no lien on, and they justifiably were quite angered. Court battles ensued, and it is not looking good for Caesars. The case is ongoing, and any negative judgment for Caesars could mean the final gutting of the company.
Wynn Resorts, Limited (NASDAQ: WYNN) has suffered the most protracted decline in its history. The decline from late 2007 to March 2009 was worse in terms of severity. Back then, Wynn lost 90% of its value from top to bottom. Now it has only lost 75%. Wynn is not a good bottom-picking play yet because Macau is still very unstable. The Chinese economy is likely to get worse due to the monetary situation there, and China’s government has not been helpful in interfering with Macau’s business. The bottom will come eventually for Wynn and Macau in general, but we probably haven’t seen it yet.
The time of trendy computer mice has come and gone. Logitech International (NASDAQ: LOGI) had its day in the sun, but is now something of a forgotten brand. It is struggling to maintain profitability and there looks to be a hard ceiling for the stock at around $16.30 a share. Aside from 2013, Logitech has not had a good December since 2009. Could it this year? Anything is possible, but if you’re looking for December gains, there are better companies.
There are certain disadvantages to selling one of the most successful drugs of all time. AbbVie Inc. (NYSE: ABBV) is going to be hounded with warnings about the impending expiration of Humira’s patent by the end of next year, and the story in 2016 looks like it will be the slow and painful pricing in of that fact. Humira sales account for about 65% of the biotech company’s total revenues. It is the elephant in the room, but this time everyone is talking about it.
There is nothing fundamentally wrong with Starbucks Corporation (NASDAQ: SBUX). It’s just that a long-term chart looks parabolic, and it is about to become the world’s first $100 billion coffee company. Yes, the company keeps growing, but that valuation just seems a bit much, along with a P/E ratio pushing 35. Retailers like Starbucks are also quite prone to inflation when it finally registers, and minimum wage battles could affect it negatively next year, as well. Yes, Starbucks could conceivably keep climbing higher, but at some point that will stop. This is the proverbial picking up nickels in front of a steamroller.
Barnes and Noble
Barnes and Noble, Inc. (NYSE: BKS) is another company long past its prime, awaiting the inevitable. The most recent plunge since July is the worst since 2008, and aside from trying to cut expenses, there looks to be little the book retailer can do to compete. Decembers are less than impressive for the stock historically, and a long-term chart looks truly frenetic and unstable.
Buffalo Wild Wings
Buffalo Wild Wings (NASDAQ: BWLD) has been a great growth story for years, but its stock movements have changed patterns since 2013. Now, instead of three steps forward and two steps back, it looks to be on an intense seesaw. Growth has stalled a bit this year and sports bars could also be seriously affected by any significant rise in consumer prices come 2016.
Junk Bond Funds
To end on a slightly different note, stay away from high-yield bonds. The SPDR Barclays Capital High Yield Bond Fund (NYSEARCA: JNK) looks to have topped out in 2014. Interest rates are on their way up either by Fed or by market, and the first victims will be high-yield bondholders. Junk bonds have already had a horrible 2015 and the Fed hasn’t even raised rates yet. Imagine what could happen when it actually does.
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