It was another tough week for the market, but that was not the case for my three stocks to avoid. The three names I thought were going to drop last week — Splunk (SPLK 5.93% ), Large lots ( FAT 3.20% )and Value line ( VALUE 2.48% ) — increased by 7%, 7% and 2%, respectively, with an average increase of 4%.
It was a week of highs (but mostly lows) on Wall Street. the S&P500 rose 1.3% for the week, so I lost a lot last week. Luckily, that hasn’t happened often lately. The S&P 500 has now outperformed my bear picks — meaning I’ve beaten the market, as these are stocks I suggest investors avoid — in 17 of the past 20 weeks. This week I see Fossil (FOSL -3.93% ), Vera Bradley (VRA -3.89% )and Atlria (MONTH 0.60% ) as stocks you might want to consider walking away from. Let’s review my short-term concerns.
Do you remember the days when you could tap your wrist to silently let someone know that you wanted to know what time it was? Good luck on this move with a youngster. People don’t wear wristwatches anymore, at least not as much as they used to. Fossil is an icon in decline. You could say it’s on borrowed time.
When Fossil releases new financials on Wednesday, it will close the seventh consecutive year of declining sales growth. He tried jumping into the wearables market with his own smartwatch, but you probably know how well it works. It also sells bags, wallets and jewelry, but that’s what happens when a brand has overstayed its welcome. The company reports shortly after Wednesday’s market close. You can tap your wrist, but Fossil might not know what time it is anymore.
Vera Bradley shares hit a new 52-week low on Friday. I don’t tend to sell a stock when it’s down, especially a well-known luxury brand. However, Vera Bradley is releasing her quarterly results on Wednesday morning, and it’s easy to see why the market is staying on the sidelines.
Analysts see the seller of designer luggage, handbags and other travel essentials post an 11% year-over-year increase in revenue for the holiday-heavy fiscal quarter that ended completed in January. That doesn’t sound too shabby, but it will only be the second time in the past nine years that Vera Bradley has seen positive annual revenue growth.
We shouldn’t be too excited about Wednesday’s report. Three months ago, analysts were expecting revenue growth of 16% before Vera Bradley offered a disappointing forecast. They also expected earnings of $0.40 per share for the fiscal fourth quarter. Now they are only looking for net earnings of $0.26 per share, down from the $0.31 per share posted a year earlier.
It’s getting worse. The company has missed Wall Street’s profit targets in three of the past four quarters. It’s a safe bet that Vera Bradley will once again disappoint the market.
From a fresh low with Vera Bradley to a fresh high here, tobacco giant Altria hit a crisp two-year high on Thursday. Altria’s appeal in these uncertain times is pretty clear. Smoking may be fading away, but it’s still a vice in all weathers. Altria has delivered 10 consecutive years of positive single-digit revenue growth. The stock’s 6.7% yield is also a dinner bell in this climate of low interest rates on traditional income-generating investments.
Of course, Altria had to acquire some of its growth. He got on the addictive vice bandwagon with interests in vaping, cannabis, and wineries. I’m also concerned about the recent trend, as revenue has shown a year-over-year decline in two of the past four quarters. If the market shifts back to growth stocks or investors begin to assess Altria’s long-term potential, the stock could be tossed out like a cigarette butt that has lost its usefulness.
If you’re looking for safe stocks, you probably won’t find them in Fossil, Vera Bradley and Altria this week.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.