Top Stories
Top Stories

Cramer's Stocks to Avoid

10 Stocks to Avoid
cramer-stocks-to-avoid-cover.jpg
Photo: CNBC

The volatile market environment has provided investors the opportunity to buy some stocks at discounts, Jim Cramer said on CNBC's "Mad Money." After all, quality stocks are sometimes brought down with the overall market when they should probably be trading at higher levels, Cramer said. Investors should be careful, though.

"There are other stocks that have sold off for a very different reason: because they deserve to go lower. These stocks are dangerous," Cramer said. "They lure you in with apparently low valuations that seem cheap, and then they lose you boatloads of money because they aren't really cheap— they're what we call value traps that have a long way to fall before they can find a bottom."

Cramer put together a list of potential value traps. He recommends investors stay away from these stocks for at least one quarter, meaning that before investors even consider buying these stocks again, they should wait for the underlying companies to report earnings. That way, investors can best gauge whether the underlying companies can turn things around.

Read on for Cramer's stocks to avoid.

By Drew Sandholm With Reuters
Posted 11 June 2012

When this story was published, Cramer's charitable trust owned Apple.

"Mad Money" Disclaimer:
The content of this website is published in the United States of America and persons who access it agree to do so in accordance with applicable U.S. law.

All opinions expressed by Jim Cramer on this website and on the show are solely Cramer's opinions and do not reflect the opinions of CNBC, NBCUNIVERSAL or their parent company or affiliates, and may have been previously disseminated by Cramer on television, radio, internet or another medium. You should not treat any opinion expressed by Cramer as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Cramer's opinions are based upon information he considers reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Cramer, CNBC, its affiliates and/or subsidiaries are not under any obligation to update or correct any information provided on this website. Cramer's statements and opinions are subject to change without notice. No part of Cramer's compensation from CNBC is related to the specific opinions he expresses.

Past performance is not indicative of future results. Neither Cramer nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Best Buy (BBY)
cramer-stocks-to-avoid-bestbuy.jpg
Best Buy (BBY)
Photo: Getty Images

Best Buy's stock is currently trading at five times next year's earnings with a 5 percent growth rate, Cramer said. It has lost 31 percent in the last month, too. While some analysts have recently thrown the electronics retailer an upgrade for its cash flows and big buyback, Cramer isn't so optimistic.

"Best Buy has a broken business model," Cramer said May 24. "It's become 'Best Browse,' a place where people go to check out electronics in person before they make their purchases on Amazon, and that's not going to change anytime soon."

While Best Buy's cash flows are promising, Cramer noted that its same-store sales declined by 5.3 percent in its latest quarter, much worse than the average Wall Street analyst expected. Management argues the company will be saved by plans to focus on mobile, but Cramer thinks the super-low margin cellphone business just won't be enough.

Click here for more from Cramer on this stock.

YPF (YPF)
cramer-stocks-to-avoid-ypf.jpg
YPF (YPF)
Photo: Juan MABROMATA | AFP | Getty Images

Based in Buenos Aires, YPF is Argentina's largest oil producer. Its stock has dropped by 61 percent in the last three months, yet it's currently trading at just three times earnings with a 13 percent growth rate.

At first glance, YPF's stock might sound attractive, but Cramer on May 24 noted that the company is being nationalized by the Argentine government. On April 16, the government announced it would seize a majority stake in YPF from Repsol, a Spanish oil and gas company. Cramer suspects the government could continue to seize more and more of the company as time goes on. So, he recommends avoiding this stock.

Click here for more from Cramer on this stock.

First Solar (FSLR)
47633778 CNBC-15-companys-inside-firstsolar.jpg
First Solar's stock is "untouchable," Cramer said on May 24. He's recommended investors stay away from shares of this energy company since it was trading at around $138 a share in September 2010. Today, the stock hovers around $13. "The entire solar power space is in horrible shape since it depends on government subsidies, and governments around the world are tightening their belts, especially on Europe which had been a big booster of solar," Cramer said. In May, however, the U.S. Department of
Photo: Getty Images

First Solar's stock is "untouchable," Cramer said on May 24. He's recommended investors stay away from shares of this energy company since it was trading at around $138 a share in September 2010. Today, the stock hovers around $13.

"The entire solar power space is in horrible shape since it depends on government subsidies, and governments around the world are tightening their belts, especially on Europe which had been a big booster of solar," Cramer said.

In May, however, the U.S. Department of Commerce imposed anti-dumping tariffs of 31 percent on Chinese-made solar cells. In turn, Cantor Fitzgerald said the development could be positive for First Solar. Cramer doesn't think it's reason enough to own the stock, though. It remains a stock to avoid, he recommends.

Click here for more from Cramer on this stock.

Fossil (FOSL)
cramer-stocks-to-avoid-fossil.jpg
Fossil (FOSL)
Photo: fossil.com

In May, fashion accessories maker Fossil slashed its full-year outlook on weakness in Europe and costs related to the acquisition of Danish watchmaker Skagen. It also forecast current-quarter earnings that fell far short of analysts' expectations. In turn, its stock lost 37 percent of its value in a single session.

"There's no doubt that this stock has been a rocket ship. However, the shorts have repeatedly warned that Fossil's accessories business has always been faddish and would eventually run out of steam," Cramer said May 8, adding that it seems the short-sellers were right about Fossil all along.

Until Fossil can turn things around, Cramer recommends avoiding its stock.

Click here for more from Cramer on this stock.

Mako Surgical (MAKO)
cramer-stocks-to-avoid-mako.jpg
Mako Surgical (MAKO)
Photo: makosurgical.com

After Mako Surgical posted disappointing quarterly results and lowered its sales forecast for a key product on May 7, the orthopedic device maker's stock lost a third of its market value in a single session. Today, the stock continues to struggle.

Mako now expects to sell 52 to 58 RIO systems — a robotic-arm interactive system used for minimally invasive knee procedures — during the full year. It had previously forecast sales of 56 to 62 RIO systems.

"Many bulls have tried to analogize this one to Intuitive Surgical," Cramer said May 8, referring to a rival medical device maker, whose stock has performed fairly well lately. "But the bears have been wise to [Mako Surgical] for a while, as one-third of the float has been sold short."

"The warning from the shorts proved true," he said.

Click here for more from Cramer on this stock.

Research In Motion (RIMM)
cramer-stocks-to-avoid-rim.jpg
Research In Motion (RIMM)
Photo: Getty Images

Research In Motion has hired bankers for a far-reaching strategic review and to look for partnerships as the BlackBerry-maker warned it would likely report a fiscal first-quarter operating loss. The Waterloo, Ontario-based company said it would also cut a "significant" number of jobs, although it did not say how many. Two sources with close connections to RIM told Reuters it plans to slash its workforce closer to 10,000 by early next year from the current 16,500.

RIM's stock has lost 75 percent of its value over the past 12 months. It's currently trading at near eight-year lows.

"RIM has entered a tailspin that most companies can't pull out of," Cramer said May 30, citing Nokia and Palm as examples. "It's very dramatic."

In Cramer's opinion, RIM's products and business model may be easy-to-understand, but he thinks the company has failed to keep up with new technology. It also continues to lose market share to rival Apple, which makes the popular iPhone and iPad devices.

According to Cramer, RIM should be avoided for the time being. Instead, he thinks investors should consider Apple. He also likes Verizon because the company has a strong product line while its stock sports a 4.8 percent dividend yield and lots of growth potential.

Source: http://www.cnbc.com/id/47608312Click here for more from Cramer on this stock.

Facebook (FB)
cramer-stocks-to-avoid-facebook.jpg
Facebook (FB)
Photo: Tony Avelar | Bloomberg | Getty Images

Shares of Facebook continue to push lower. On Thursday, the stock slipped under $27 a share at one point to set a record low. It has shed almost $30 billion in market value since a botched May 18 initial public offering, losing roughly 25 percent of its value since the IPO.

"What matters is that this drama has no end in sight," Cramer said May 30. "Remember, we still don't know what the bankers told the buyers and sellers of this stock on the eve of the horrendous IPO, but it was something that freaked them out, causing the sellers to dump and sell hard and causing the buyers to walk away or slash their buy orders."

Meanwhile, it seems that despite its nearly a billion users and domination in the world of social networking, the Menlo Park, Calif.-based company is having difficultly monetizing its growing presence on smartphones and other mobile devices, Cramer said.

Rather than toil with Facebook, Cramer recommended investors consider Apple. He noted the iPhone and iPad maker boasts a "fantastic" balance sheet, low P/E multiple and "dazzling" array of products in the pipeline.

Click here for more from Cramer on this stock.

Morgan Stanley (MS)
47633662 20-stocks-with-the-potential-to-pop-0312-morgan-stanely.jpg
Some on Wall Street are concerned about Morgan Stanley's balance sheet, Cramer said May 30. The ratings agencies could soon offer a "vicious" review of the New York-based financial institution, he added."Despite the company's endless protestations, Morgan Stanley is perceived as the weakest of the American banking institutions when it comes to ties with Europe," Cramer explained. "It's considered the one the ratings agencies are most concerned about, even as this firm has done more to shore up i
Photo: Timothy A. Clary | AFP | Getty Images

Some on Wall Street are concerned about Morgan Stanley's balance sheet, Cramer said May 30. The ratings agencies could soon offer a "vicious" review of the New York-based financial institution, he added.

"Despite the company's endless protestations, Morgan Stanley is perceived as the weakest of the American banking institutions when it comes to ties with Europe," Cramer explained. "It's considered the one the ratings agencies are most concerned about, even as this firm has done more to shore up its balance sheet than other major institution in the space."

Cramer has criticized Morgan Stanley in its role as lead underwriter for the Facebook IPO.

Since the No. 1 social network went public May 18, Facebook's stock has lost roughly 25 percent of its value. Cramer said some accused Morgan Stanley of withholding information about the deal from all but a few privileged clients, but according to Reuters, Morgan Stanley said on May 22 that its procedures for the IPO complied with all applicable regulations.

All things considered, Cramer thinks Morgan Stanley is "just too tough to call" right now. Rather than get caught up in Morgan Stanley's drama, though, he prefers Wells Fargo.

Click here for more from Cramer on this stock.

Deckers Outdoors (DECK)
47633801 cramers-holiday-stocks-2011-deckers.jpg
Shoemaker Deckers Outdoor slashed its full-year earnings forecast in April as it expects its margins to take a hit from high sheepskin costs.The Goleta, Calif.-based company also said sales of its UGG boots, which have been spurring growth at the company for several quarters, will rise by about 10 percent in the year, down from its previous guidance of about 11 percent. Boot sales are typically strong in January and February, but this year orders fell due to the mild winter, the company said.On
Photo: Getty Images

Shoemaker Deckers Outdoor slashed its full-year earnings forecast in April as it expects its margins to take a hit from high sheepskin costs.

The Goleta, Calif.-based company also said sales of its UGG boots, which have been spurring growth at the company for several quarters, will rise by about 10 percent in the year, down from its previous guidance of about 11 percent. Boot sales are typically strong in January and February, but this year orders fell due to the mild winter, the company said.

On April 27, Cramer acknowledged the weather was warm this winter, but he thinks the declining sales of UGG boots simply shows the brand has "run out of steam."

"The lifecycle of a brand can play out, and I think that's exactly what happened," Cramer said.

Although DECK is trading at lower levels these days, Cramer recommends staying away for now.

Click here for more from Cramer on this stock.

Green Mountain Coffee Roasters (GMCR)
47633871 Gutsy-Calls_of_2011-green-mountain.jpg
Green Mountain Coffee Roasters is still trying to work out why it fell short of its own sales target, three weeks after the company shocked investors with a bad miss, CEO Lawrence Blanford said.Green Mountain, which dominates U.S. single-cup coffee with its Keurig brewers, had reported lower-than-expected sales on May 2 for the second time in three quarters and warned that its once-scorching growth was slowing, sparking a run that wiped off more than half its market value.On May 8, Cramer admitt
Photo: Herb Swanson | Bloomberg | Getty Images

Green Mountain Coffee Roasters is still trying to work out why it fell short of its own sales target, three weeks after the company shocked investors with a bad miss, CEO Lawrence Blanford said.

Green Mountain, which dominates U.S. single-cup coffee with its Keurig brewers, had reported lower-than-expected sales on May 2 for the second time in three quarters and warned that its once-scorching growth was slowing, sparking a run that wiped off more than half its market value.

On May 8, Cramer admitted the short-sellers were right about Green Mountain. In turn, he thinks investors should keep track of what the shorts are saying, especially when researching stocks.

"Sure, short sellers can be wrong, like any other kind of investor," Cramer said. "But overall, the shorts provide a valuable function, and the skepticism they engender can make you, me and all of us better investors."

Click here for more from Cramer on this stock.