9 Risky S&P 500 Companies to Sell Right Now

NEW YORK (TheStreet) -- A smart investor knows when to double down on an opportunity and when to walk away.

There are plenty of companies that may be in industries that have strong growth prospects but are not good investments. Here are nine stocks in the S&P 500 that investors should stay away from.

The stocks on this list all have "Sell" ratings with a D or worse rating. The companies also have a beta measurement -- a popularity measure of volatility -- of greater than 1.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on June 16, 2015 closing prices.

AMD Chart AMD data by YCharts

1. Advanced Micro Devices (AMD)
Market Cap: $1.8 billion
Sector: Technology/Semiconductors
TheStreet Ratings: Sell, D
Beta: 2.43
Year-to-date return: -12%

Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. The company's products primarily include x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs), and semi-custom System-on-Chip (SoC) products.

TheStreet Ratings said: "We rate ADVANCED MICRO DEVICES (AMD) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 800.0% when compared to the same quarter one year ago, falling from -$20.00 million to -$180.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ADVANCED MICRO DEVICES's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 133.41 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, AMD's quick ratio is somewhat strong at 1.30, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.93%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 666.66% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • ADVANCED MICRO DEVICES has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ADVANCED MICRO DEVICES reported poor results of -$0.53 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings (-$0.23 versus -$0.53).

 

APA Chart APA data by YCharts

2. Apache Corp. (APA)
Market Cap: $22.3 billion
Sector: Energy/Oil & Gas Explorations & Production
TheStreet Ratings: Sell, D
Beta: 1.48
Year-to-date return: -5.8%

Apache Corporation, an independent energy company, explores, develops, and produces natural gas, crude oil, and natural gas liquids.

TheStreet Ratings said: "We rate APACHE CORP (APA) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 2070.8% when compared to the same quarter one year ago, falling from $236.00 million to -$4,651.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, APACHE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $650.00 million or 71.65% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 39.06%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 749.47% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • APACHE CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, APACHE CORP swung to a loss, reporting -$13.07 versus $5.95 in the prior year. This year, the market expects an improvement in earnings (-$1.03 versus -$13.07).

 


AVP Chart AVP data by YCharts

3. Avon Products (AVP)
Market Cap: $2.9 billion
Sector: Consumer Non-Discretionary/Personal Products
TheStreet Ratings: Sell, D
Beta: 1.40
Year-to-date return: -29.3%

Avon Products, Inc. manufactures and markets beauty and related products worldwide.

TheStreet Ratings said: "We rate AVON PRODUCTS (AVP) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly decreased to -$198.10 million or 75.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • AVP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 52.99%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Personal Products industry average, but is greater than that of the S&P 500. The net income increased by 12.5% when compared to the same quarter one year prior, going from -$168.30 million to -$147.30 million.
  • AVP, with its decline in revenue, underperformed when compared the industry average of 3.7%. Since the same quarter one year prior, revenues fell by 17.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • AVON PRODUCTS has improved earnings per share by 13.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AVON PRODUCTS reported poor results of -$0.88 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus -$0.88).

 


BTU Chart BTU data by YCharts

4. Peabody Energy (BTU)
Market Cap: $664 million
Sector: Energy/Coal & Consumable Fuels
TheStreet Ratings: Sell, D
Beta: 2.20
Year-to-date return: -69%

Peabody Energy Corporation offers mining of coal. The company operates through Western U.S. Mining, Midwestern U.S. Mining, Australian Mining, Trading and Brokerage, and Corporate and Other segments.

TheStreet Ratings said: "We rate PEABODY ENERGY CORP (BTU) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 264.1% when compared to the same quarter one year ago, falling from -$48.50 million to -$176.60 million.
  • The debt-to-equity ratio is very high at 2.55 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BTU has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PEABODY ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for PEABODY ENERGY CORP is currently extremely low, coming in at 14.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -11.48% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $3.40 million or 93.71% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

 

CHK Chart CHK data by YCharts

5. Chesapeake Energy Corp. (CHK)
Market Cap: $8.3 billion
Sector: Energy/Oil & Gas Exploration & Production
TheStreet Ratings: Sell, D
Beta: 1.31
Year-to-date return: -36%

Chesapeake Energy Corporation engages in the acquisition, exploration, and development of properties for the production of oil, natural gas and natural gas liquids (NGL) from underground reservoirs in the United States.

TheStreet Ratings said: "We rate CHESAPEAKE ENERGY CORP (CHK) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 979.8% when compared to the same quarter one year ago, falling from $425.00 million to -$3,739.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHESAPEAKE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $423.00 million or 67.23% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 55.99%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1159.25% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • CHESAPEAKE ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CHESAPEAKE ENERGY CORP increased its bottom line by earning $1.83 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 109.8% in earnings (-$0.18 versus $1.83).

 

CLF Chart CLF data by YCharts

6. Cliff's Natural Resources Inc. (CLF)
Market Cap: $796 million
Sector: Materials/Steel
TheStreet Ratings: Sell, D-
Beta: 2.23
Year-to-date return: -27.3%

Cliffs Natural Resources Inc., a mining and natural resources company, produces iron ore and metallurgical coal.

TheStreet Ratings said: "We rate CLIFFS NATURAL RESOURCES INC (CLF) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 980.8% when compared to the same quarter one year ago, falling from -$70.30 million to -$759.80 million.
  • The gross profit margin for CLIFFS NATURAL RESOURCES INC is rather low; currently it is at 24.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -170.35% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$228.20 million or 178.29% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • CLF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 61.62%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • CLF, with its decline in revenue, underperformed when compared the industry average of 17.3%. Since the same quarter one year prior, revenues fell by 27.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

 

ESV Chart ESV data by YCharts

7. Ensco Plc (ESV)
Market Cap: $5.5 billion
Sector: Energy/Oil & Gas Drilling
TheStreet Ratings: Sell, D
Beta: 1.34
Year-to-date return: -22.3%

Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide. The company operates through three segments: Floaters, Jackups, and Other.

TheStreet Ratings said: "We rate ENSCO PLC (ESV) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ESV's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 54.07%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ENSCO PLC has improved earnings per share by 9.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENSCO PLC swung to a loss, reporting -$11.70 versus $6.08 in the prior year. This year, the market expects an improvement in earnings ($4.03 versus -$11.70).
  • ESV's debt-to-equity ratio of 0.72 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that ESV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.14 is high and demonstrates strong liquidity.
  • Net operating cash flow has increased to $459.00 million or 10.17% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's average is still marginally south of the industry average growth rate of 12.41%.

 

 

JCP Chart JCP data by YCharts

8. J.C. Penney Inc. (JCP)
Market Cap: $2.5 billion
Sector: Consumer Goods & Services/Department Stores
TheStreet Ratings: Sell, D
Beta: 1.99
Year-to-date return: 25.5%

J.C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., sells merchandise through department stores in the United States.

TheStreet Ratings said: "We rate PENNEY (J C) CO (JCP) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 3.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.48, which clearly demonstrates the inability to cover short-term cash needs.
  • In its most recent trading session, JCP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, PENNEY (J C) CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to -$226.00 million or 16.60% when compared to the same quarter last year. Despite an increase in cash flow of 16.60%, PENNEY (J C) CO is still growing at a significantly lower rate than the industry average of 125.49%.
  • 36.44% is the gross profit margin for PENNEY (J C) CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.84% trails the industry average.

 

QEP Chart QEP data by YCharts

9. QEP Resources inc. (QEP)
Market Cap: $3.3 billion
Sector: Energy/Oil & Gas Exploration & Production
TheStreet Ratings: Sell, D
Beta: 1.80
Year-to-date return: -7.4%

QEP Resources, Inc., through its subsidiaries, operates as an exploration and production company.

TheStreet Ratings said: "We rate QEP RESOURCES INC (QEP) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 240.1% when compared to the same quarter one year ago, falling from $39.70 million to -$55.60 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, QEP RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for QEP RESOURCES INC is currently lower than what is desirable, coming in at 29.78%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -11.31% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$272.70 million or 184.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.40%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 557.14% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

 

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