Zacks.com releases details on a group of stocks that are currently members of the exclusive Zacks #5 Rank List – Stocks to Sell Now. These stocks are currently rated as a Zacks Rank #5 (Strong Sell): Nortel Networks Corp (NYSE: NT) and ArthroCare Corp (Nasdaq: ARTC). Further, Zacks announced #4 Rankings (Sell) on two other widely held stocks: SanDisk Corp (Nasdaq: SNDK) and Fannie Mae (NYSE: FNM). To see the full Zacks #5 Rank List - Stocks to Sell Now visit: http://at.zacks.com/?id=92.
Since inception in 1988, the S&P 500 has outperformed the Zacks #5 Rank List — Stocks to Sell Now by 129% annually (+5.3% vs. +12.1%). While the rest of Wall Street continued to tout stocks during the market declines of the last few years, Zacks told investors which stocks to sell or avoid.
Here is a synopsis of why NT and ARTC have a Zacks Rank of #5 (Strong Sell) and should most likely be sold or avoided for the next one to three months. Note that a #5 Strong Sell rating is applied to 5% of all the stocks in the Zacks Rank universe:
Nortel Networks Corp (NYSE: NT) warned that a downturn in the U.S. market was choking wireless spending by carriers even as it posted a quarterly loss that tripled due to restructuring charges and currency exchange losses. The company recently cut numerous jobs and moved others to Asia in order to lower operating expenses. Nortel continues to invest in next-generation wireless technologies even though CDMA forms an important part of its business. Telecom gear manufacturers are likely to be challenged by tightened capital budgets of carriers due to ongoing recessionary conditions in the global economy.
ArthroCare Corp (Nasdaq: ARTC) shares tanked recently after the Securities and Exchange Commission ordered an informal inquiry into the medical devices maker’s accounting practices. The order came after the company raised concerns regarding the credibility of its financial position and internal controls by announcing a restatement of results for 2006, 2007 and the latest first quarter. The restatement will reduce revenue by $4 million to $7 million in 2006, $20 million to $25 million in 2007, and $2 million to $5 million in the first quarter of 2008.
Here is a synopsis of why SNDK and FNM have a Zacks Rank of 4 (Sell) and should also most likely be sold or avoided for the next one to three months. Note that a #4 Sell rating is applied to 15% of all the stocks ranked by Zacks;
SanDisk Corp (Nasdaq: SNDK) swung to a sharp second-quarter loss after sales declined unexpectedly, but the company warned that the worst was still to come as it would slash prices of its memory chips further to reduce excess inventory. SanDisk shares have dropped half their value since mid-May. Given the rapid deterioration in consumer spending, meaningful improvement in demand is not expected through the rest of the year. Wall Street analysts now expect the company to post a loss of 63 cents in fiscal 2008.
Standard & Poor's recently slashed its rating on the preferred stock of Fannie Mae (NYSE: FNM) to "A" from "A-plus, saying the largest U.S. home funding company presented significant risk to the government. The company’s deteriorating financial profile, pressured by continued home price declines in key markets, higher credit-related expenses and capital challenges led to a wider-than-expected loss in the second quarter. Fannie Mae also hacked its dividend to conserve capital since it expects more losses going forward from mortgage defaults and foreclosures. In the last week, analysts have lowered their current-year estimate to project a loss of $6.01 per share.
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About the Zacks Rank
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +32.2%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 129% annually (+5.3% vs. +12.1%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.
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