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NEW YORK (TheStreet) -- The stocks that previously could do no wrong can now do no right, and vice versa, Jim Cramer told his Mad Money TV show viewers Monday as he listed the groups of stocks that have now become hazardous to your portfolio.
Cramer said that first group of stocks that are toxic to your portfolio is what he calls the "Amazon Army," stocks that follow Amazon.com's (AMZN) lead and sacrifice earnings for growth. Investors used to clamor for these stocks, but with things getting better for the likes of Wal-Mart (WMT) and Target (TGT), why not invest in those names that actually have profits?
The next hazardous group is any sector that has seen a huge number of recent initial public offerings. Cramer said the only reason he can find that Rubicon Project (RUBI) fell today is that there are two competitors waiting in the wings. With so much supply, Cramer said it's a classic case of "dilution by IPO."
The third group investors need to avoid are the early-stage biotechs. For months now money has been flowing out of big pharma and into these little exciting biotechs, but now that big pharma is once again exciting thanks to a wave of mergers and acquisitions, why gamble on the speculative little guys with no earnings?
What's working in the markets? Cramer said with interest rates remaining low, any stock with a good yield is working. That's why Procter & Gamble (PG) and McDonald's (MCD) are among the best performers. They might not have growth, but they offer safety and yield.
What is going on at Bank of America (BAC)? That's what Cramer pondered about this Action Alerts PLUS holding after the bank announced Monday it misstated the value of some its assets to the government. The error will cause a suspension of both the bank's planned dividend increase and its stock buyback program, news that sent shares down over 6% on the day.
Is this news disappointing, embarrassing or just foolish? Cramer wondered. Why would investors ever trust Bank of America again? All good questions, said Cramer, and ones that led him to determine that large banks just can't effectively be run anymore.