Samsung's Latest Product Problem Is Another Reason to Steer Clear

On Friday, Samsung Electronics (SSNLF)  confronted another safety nightmare as the U.S. government demanded a massive recall of its washing machines just two months after more than 100 incidents in which its Galaxy Note 7 mobile phone spontaneously burst into flames. 

The South Korea-based manufacturer's stock is tanking, down about 5% over the past month.

Given the company's problems, it is a stock to avoid.

The lids of the company's top-loading washing machines are prone to detach from the chassis during use, causing risk of serious injury, the U.S. Consumer Product Safety Commission said.

Samsung Electronics has received nine reports of consumers being injured by the machines, including one who suffered a broken jaw, according to the agency.

In addition, the company itself has received 733 reports of either excessive vibration in the washing machine or the tops popping off.

Thirty-four washing machine models, made between March 2011 and this month, are involved in the recall. In all, Samsung Electronics is recalling 2.8 million individual machines.

Given that the machines each cost between $450 and $1,500, that is a hefty financial blow.

And it is especially painful because, it comes on the heels of the company's decision to recall 2.5 million Galaxy Note 7 smartphones because they were catching fire. The threat was so serious that airlines have been banning these phone models on board.

Samsung Electronics has ceased manufacturing Note 7s.

The fiasco could cost the company $9.5 billion in sales and $5 billion in profits, analysts have estimated.

These aren't the only Samsung Electronics products that have been blowing up. The company has also recently been in the headlines for exploding hoverboards and ecigarettes, too.

In these cases, the most likely culprit is cheap lithium-ion batteries. In the case of the washing machines, blame faulty design or shoddy workmanship. 

Investors are clearly unhappy

Lumped under the consumer electronics banner, the company's appliance and television divisions make up about 10% of the company's operating profits. The smartphone division is bigger, at about 15% of operating profit.

It is unlikely that investors will be able to profit in the near term. The stock was way up this year until the Galaxy Notebook recall.

However, a spate of recalls in quick succession don't bode well for profits.

For investors who are looking to make money off smartphones, Apple remains the classic long-term play, despite a few ups and downs. Alphabet also has potential, especially as the company rolls out Google Pixel phones.

APPLE and Alphabet are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stocks here. Want to be alerted before Cramer buys or sells AAPL and GOOGL? Learn more now.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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