These companies are losers. They don’t know what they’re doing. Nobody gets them. Terrible companies.

 

Dear America,

The day has come at last. How’d we get here? Is this crazy? Well, this will be an investment opinion column like no other. In the past, the victories of these columnists have not been your victories, but these victories will be your victories. What do you mean “In what way?” That’s a terrible question. Smarmy, negative, not answering it.

Anyway, a lot these companies are bringing in drugs, they’re rapists, and some of them, I’m sure, are nice companies. But the people in charge don’t know what they’re doing. They’re as over-rated as Meryl Streep. I’m doing them a huge favor right now, Trust me. They’re as dishonest as people who did those phony election polls that were so wrong, and are now doing approval rating polls.

So, the media, they love these companies. Oh, yeah, everything’s great. Well, the media is very dishonest. Terrible people. Losers.

Remember to treat these ideas as just that, ideas, and do your own research, blah blah blah. And now I’m going to stop talking like this, if I even can.

Bank of America (BAC)

The market, as you know is irrational and emotional, and its response to the recent rise of BAC shares demonstrates this perfectly. Shares are up 35% since early November. No one expected them to rise if Trump won the election, but once they began to do so, everyone came up with 100 reasons why Trump was great for Bank of America, and all other banks too, for that matter. Consider: there are no sell or worse analyst opinions on the stock. Short interest has declined 22% since November. The put/call ratio is 0.88—under one being a sign of optimism.

Bank of America’s revenue is growing at the uninspiring rate of 3%. Get off this bandwagon before it overturns, pinning everyone onboard underneath.

BAC

Chart courtesy of www.stockcharts.com

McDonald’s (MCD)

You may remember that early last year, McDonald’s seemed to have solved all its problems by offering breakfast all day. From Autumn of 2015 to the stock’s peak in May of 2016, shares rose 25%—quite a rise for a big, generally sluggish stock. At the time, I wrote that the rise seemed excessive, given what was very likely the public’s response to the novelty and hype surrounding all day breakfast.

Time will tell whether I was right about the share price—it has fallen only by $5 so far—but I was right about the public’s short term interest. The company is now down in both quarterly revenue and earnings, year-over-year, back in the secular decline that made it look like a sell when it was $25 cheaper than it is now. Don’t make the mistake of letting the share price tell you whether a company is growing or not. Sell this dog and buy a company with rising earnings.

MCD

Chart courtesy of www.stockcharts.com

ICICI Bank Limited (IBN)

ICICI is an Indian Bank and Indian banks are in big trouble, as, may be, the entire nation. On November 8, the day before America went to the polls, the Prime Minister of India announced that Rs500 notes and RS1000 notes would simply no longer be recognized as legal tender. This was allegedly done to combat a wave of counterfeit and money laundering that threatened to swallow the economy whole. Now, there is turmoil.

Banks, in particular, are suffering. One big Indian Bank, Axis Bank, recently reported its net profits down 73%. ICICI reports on January 31, and analysts are calling for a decline of 30%, but that may be optimistic. Even if it is accurate, it doesn’t explain why the company still has a relatively healthy P/E of 15.36. Danger, Will Robinson.

IBN

Chart courtesy of www.stockcharts.com

Yelp! (YELP)

Hate Yelp. Just a suggestion, but I feel a very decent and proper one. Yelp’s demand that business owners pay $350 to have their account “optimized” is just shy of blackmail. Every business has its detractors, but Yelp does nothing to validate the claims of those who post negative feedback. So far, the business world has basically let Yelp run amok, but they will wise up eventually. In the meantime, Yelp has negative earnings, negative net income, and a P/E of 140. That’s terrible!

Of course, it could be worse…

YELP

Chart courtesy of www.stockcharts.com

Anadarko Petroleum (APC)

Well, this is a big energy company that isn’t doing so hot right now. Current EPS is a staggering -$10.25. Net income over the last year? -$3.81 billion. Profit margin? -48.15%. And yet… shares of APC have gone up by 100% over the past year. Shares have done particularly well since, of course, the election. The play here presumably involves the new administration gutting every conceivable environmental regulation, thus turning America into an undiluted fracking festival. Even if that were true, that would immediately cause the price of oil to plummet, making things even worse for Anadarko. It requires tremendous faith to see this loser as somehow being worth $40 billion again any time in the near future. Faith is all well and good, but let’s remember to apply logic.

APC

Chart courtesy of www.stockcharts.com

Symbols: APC BAC IBN MCD YELP
Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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