You're hearing a lot about bargains lately. Stocks are at some of the lowest prices they've been in years.
But some of those bargains are not what they seem.
The S&P 500 is still down 17.5% from its all-time high. It looks like smorgasbord of cheap stocks for the picking, and that it is.
Check out some of these blue-chip stocks from the Dow Jones Industrial Average:
- JPMorgan Chase & Co. (NYSE: JPM), down 35.9% year to date.
- Exxon Mobil Corp. (NYSE: XOM), down 39%.
- Dow Inc. (NYSE: DOW), down 41.8%.
- Boeing Co. (NYSE: BA), down 58.6%.
Some of these are a lifetime bargain. But we can't just assume every stock is at an awesome discount right now. It's dangerous to assume things can't get worse just because some analyst claims a stock is at rock bottom.
Boeing is a good example. It peaked in early 2019 at $446.01 but ended the year at $325.76, down 27.0%. Was that cheap?
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This year, it is down 58.6% from there, as it closed Wednesday at $134.97.
How about General Electric Co. (NYSE: GE)? Remember its fall from grace from 2016, when it traded at $31.60, to 2018, when it traded at $6.49? It closed trading Wednesday at $6.43 - below its supposed fire-sale bottom.
These are classic examples of false hope. In short, just because a stock is down in price does not make it a "cheap."
Andrew Keene, Money Morning Special Contributor, has exposed a group of stocks that he thinks look cheap on the surface but are really still in trouble.
Here are the three stocks to avoid right now...
Don't Fall for These 3 Stocks
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Here are just a few of the stocks Andrew thinks you should avoid. If you are thinking of buying them, don't. If you still have them, take advantage of their bounces from March lows and salvage some of your money.
- Six Flags Entertainment Corp. (NYSE: SIX). All major theme parks are officially closed until further notice. Six Flags, unlike its competitor Walt Disney Co. (NYSE: DIS), does not have content and other businesses to help it ride out the storm. Without a park open to customers, the stock is poised to head lower.
- Marriott International Inc. (NASDAQ: MAR). This is a hospitality company. And that industry is virtually shuttered, too. With hotels having a huge overhead and needing to stay open despite their low occupancy, they have no other option than to continue to burn through cash.
- MGM Resorts International (NYSE: MGM). Not only is MGM a hotel company, but it relies on gambling. Las Vegas is virtually closed, and Macau (China) - the casino capital of the world - was at a 2% occupancy rate. That means MGM is getting hit on two fronts.
Can any or all of these stocks recover when the economy opens back up? Sure, they can. But we don't know when that's going to happen.
States cannot agree on a plan. And even if everything opens up by summer, customers are going to be very slow to resume activities that bring them into close contact with others - like casinos, hotels, and parks.
For now, these stocks are down in price for a reason. Don't sit and hope for them to rebound. But your time could be better spent...
How to Look for Low-Cost, High-Potential Opportunities Outside the Stock Market
In this kind of financial turbulence, we recommend you pad your portfolio with opportunities that live outside of the greater markets.
That's why we've brought in these two experts to show you the ropes.