{"id":12028,"date":"2023-05-22T08:20:41","date_gmt":"2023-05-22T12:20:41","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/ibm-colgate-and-three-other-stocks-to-sell-or-avoid\/"},"modified":"2023-05-22T08:20:43","modified_gmt":"2023-05-22T12:20:43","slug":"ibm-colgate-and-three-other-stocks-to-sell-or-avoid","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=12028","title":{"rendered":"IBM, Colgate And Three Other Stocks To Sell\u2014Or Avoid"},"content":{"rendered":"
\n

My father owned International Business Machines (
\n IBM
\n <\/fbs-ticker>) stock most of the time from the 1950s to the 1980s. Maybe your father did too.<\/p>\n

I hope he did, because IBM shares rose well over one hundred fold in that period. Today, I think IBM and some other well-known names should be sold.<\/p>\n

My criteria for the sell recommendations I\u2019m bringing you today are pretty simple:<\/p>\n

\u00b7 Negative earnings growth in the past five years.<\/p>\n

\u00b7 Negative earnings growth in the past one year.<\/p>\n

<\/fbs-ad><\/p>\n

\u00b7 A stock price that\u2019s at least 30 times the company\u2019s earnings.<\/p>\n

In short, these are stocks that I think have their best days behind them, yet are still priced as if they were in their glory days.<\/p>\n

IBM<\/h2>\n

In the past five years, IBM\u2019s profits have fallen roughly 20% a year. Last year it tumbled more than 50%. This is not your father\u2019s IBM.<\/p>\n

Electric typewriters were the company\u2019s mainstay from the 1930s through the 1950s. The company dominated that market with a market share as high as 75%. Starting in the 1950s, IBM became one of the nation\u2019s first computer companies and it kept market leadership for about four decades. But it is no longer the leader or even a leader.<\/p>\n

Analysts think IBM\u2019s profit will jump from $1.95 a share last year to $9.48 this year, and be above $10 a share in 2024 and 2025. When I see analysts projecting such a large increase in earnings, I\u2019m inclined to be skeptical.<\/p>\n

IBM\u2019s debt is 286% of its equity (corporate net worth). I rarely buy a stock when this ratio is over 100%. Others do\u2014and more power to them. But interest rates have risen, so a high debt ratio may be more of a problem in the next few years than it was in the past few.<\/p>\n

Colgate Palmolive (CL)<\/h2>\n

Colgate-Palmolive Co. owes $8.8 billion on its long-term debt. You can\u2019t compute a debt-to-equity ratio because Colgate\u2019s equity (also known as corporate net worth or book value) is negative to the tune of $6 million.<\/p>\n

One could argue that this doesn\u2019t matter because Colgate\u2019s products\u2014toothpaste, shampoo, pet food and the like\u2014enjoy such steady demand. Yet I can\u2019t quite agree.<\/p>\n

Colgate\u2019s earnings were down an average of about 1% a year in the past five years, and down about 20% last year.<\/p>\n

Salesforce (CRM)<\/h2>\n

At Salesforce profits fell about 85% last year and declined by about 2% per year over the past five years. I use Salesforce\u2019s contact-management software and mostly like it, but the company faces increasing competition.<\/p>\n

There are a lot of things to like about this company but the stock price is too high in my opinion. It\u2019s 1001 times the company\u2019s most recent profits, and about 29 times analysts\u2019 consensus estimate of profits for the fiscal year in progress.<\/p>\n

Keurig Dr. Pepper<\/h2>\n

Keurig Dr. Pepper sports a price\/earnings multiple of 34. Yet earnings growth is unimpressive: negative 14% a year over the past five years, and negative 44% in the latest year.<\/p>\n

I have nothing against the company\u2019s soft drinks or its convenient little coffee packages. I think the products are fine. But can you think of an industry more competitive than drinks?<\/p>\n

Clorox
\n CLX
\n <\/fbs-ticker><\/h2>\n

Again, this is a perfectly fine company. But the stock got a huge lift from people disinfecting surfaces in households and workplaces during the pandemic. Now that the pandemic is fading, profits are down about 5% per year over the past five years, and 84% in the past year.<\/p>\n

Clorox has $2.4 billion in long-term debt. The company\u2019s equity is currently only $321 million. The stock trades at 286 times recent earnings and 30 times analysts\u2019 estimates.<\/p>\n

The Record<\/h2>\n

This is the 16th<\/sup> column I\u2019ve written featuring sell recommendations. My suggestions from a year ago were mostly on target. Collectively my five \u201csells\u201d were down 2.1%, versus a gain of 7.3% for the Standard & Poor\u2019s 500 Total Return Index. Boston Properties
\n BXP
\n <\/fbs-ticker> was my best pick, falling 51%. Alnylam Pharmaceuticals
\n ALNY
\n <\/fbs-ticker> was my \u201cworst,\u201d rising 47%.<\/p>\n

Bear in mind that my column results are hypothetical and shouldn\u2019t be confused with results I obtain for clients. Also, past performance doesn\u2019t predict the future. Longer-term, the record is mixed. Nine times out of 15, my sell recommendations underperformed the S&P (as one would hope). However, due to bad picks in 2005 and 2010, the average return for my \u201csells\u201d was 12.7%, versus 11.1% for the index.<\/p>\n

Disclosure: I have no positions (long or short) in the stocks discussed in today\u2019s column, personally or for clients. <\/em><\/p>\n

John Dorfman is chairman of Dorfman Value Investments LLC in Boston, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at <\/em>jdorfman@dorfmanvalue.com<\/em>. <\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

My father owned International Business Machines ( IBM ) stock most of the time from the 1950s to the 1980s. Maybe your father did too. I hope he did, because IBM shares rose well over one hundred fold in that period. Today, I think IBM and some other well-known names should be sold. My criteria […]<\/p>\n","protected":false},"author":1,"featured_media":12029,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-12028","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\nIBM, Colgate And Three Other Stocks To Sell\u2014Or Avoid | iFintechWorld<\/title>\n<meta name=\"description\" content=\"My father owned International Business Machines ( IBM ) stock most of the time from the 1950s to the 1980s. Maybe your father did too. 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