With such uncertainty, following an absolute return strategy continues to offer investors the biggest bang for their buck. There is no sense in guessing where the market will be down the road.
Instead, buy cheap stocks and sell stocks that are expensive. Then blend the two approaches together in one portfolio and chances are you'll make money.
Even with a huge rally in stocks, the S&P 500 ended the second quarter with a year-to-date gain of 1.78%. That is a vast improvement compared to the 11% loss at the end of the first quarter, but it's a minimal return for taking risk in the stock market.
Investors need to do better -- and they can.
The aggregate return of my Top 10 Stocks to Avoid in 2009 was a negative 13.48% at the end of the second quarter. With an absolute return approach, investors would be theoretically short these 10 stocks, thus generating positive gains when covered. Obviously with a loss of 13.48% in the first half of the year, an investor would be well on the way to a fat return at a time when the overall market is flat.
I see nothing in the future to suggest a change in this approach. If anything, I think the market is overbought at the moment and is indeed going through a short-term correction.
I look for the aggregate loss of these 10 stocks to be greater than 20% at the end of this quarter.
Here are the 10 stocks to avoid in your portfolio. Click on each stock to learn more.
Stock #1: Delta Airlines (NYSE: DAL)
Stock #2: Dupont (NYSE: DD)
Stock #3: 3M (NYSE: MMM)
Stock #4: Capital One (NYSE: COF)
Stock #5: Boeing (NYSE: BA)
Stock #6: Eastman Chemical (NYSE: EMN)
Stock #7: United Airlines (NASDAQ: UAUA)
Stock #8: United Technologies (NYSE: UTX)
Stock #9: Eastman Kodak (NYSE: EK)
Stock #10: American Express (NYSE: AXP)
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