The following is an excerpt from 7 Blue-Chip Stocks You Shouldn’t Hold Anymore.
Marriage should be for life. But stock ownership? Not so much. Yes, I understand that a long-term buy-and-hold strategy keeps fees and taxes low and has generally proven to be a solid plan. But not all stocks are keepers — even supposedly reliable blue-chip stocks. Sometimes you’re better off casually dating them for a while and then moving on.
So, when should you consider parting ways with a long-held blue-chip stock? I have a few general guidelines.This obviously applies to speculative plays like biotech companies, tech startups or oil and gas exploration companies. But it can just as easily apply to established blue chips — even ones you might have held for years or even decades.
- To start, do an honest assessment of the company’s growth prospects. If its market is mature and not likely to see significant growth, it might be time to move on.
- Also, look for the possibility of technological obsolescence. If you’re not sure what I’m talking about here, look at what Apple’s (AAPL) iPhone did to BlackBerry (BBRY).
- Price is also a consideration. If a blue chip is simply too expensive, then your returns going forward likely will be disappointing.
- But more than anything, think of opportunity cost. Money you have invested in a given stock is money you can’t invest elsewhere. So make sure that stock is the best use of your limited funds.
Today, we’re going to look at seven blue-chip stocks that you probably shouldn’t hold anymore.
All had their day in the sun … but now it’s time to move on.
Blue-Chip Stocks to Dump: Altria (MO)
I’m not much of a believer in socially responsible investing. It’s not that I advocate being socially irresponsible, but more that I don’t want to arbitrarily limit my options. And over the past several decades, the fact is that because they are shunned by socially responsible investors and relegated to perpetual value stocks, sin stocks tend to outperform.
Unfortunately, this no longer holds true — at least for tobacco stocks like Marlboro maker Altria Group (MO).
A decade of extremely low interest rates has led to a global hunt for yield, and desperate investors have pushed the prices of traditional dividend stocks like Altria to unreasonably high levels. MO trades for more than 18 times forward earnings and yields just 3.7%. That’s simply not good enough for a company whose primary product becomes less popular with every passing year.
Making it worse, the U.S. Food and Drug Administration announced today that it was considering lowering the nicotine content of cigarettes to “nonaddictive” levels. Investors reacted predictably by dumping the stock.
If you own Altria for the dividend, you likely will do better buying a decent REIT or even an oil and gas pipeline.
To finish reading the article, please see 7 Blue-Chip Stocks You Shouldn’t Hold Anymore.
Disclosures: Long AAPL