Some of the cheapest stocks now in the market are, not suprisingly, the blue chip stocks – the once biggest and best in their industry. With the complete evisceration of stock values, and no, they’re probably not yet done, many of what once were the shining stars of the stock market universe have turned into the dark, fading life-sucking trap of a blackhole.
From the Dow, there’s Citigroup now trading at $1.03 followed very closely by General Motors at $1.45. Third runner up goes to Bank of America at $3.14 and the last spot is taken by materials firm Alcoa valued at $ 5.22 per share. Outside of the Dow, there are more and they go for under a dollar:
- AIG is almost worth a quarter at 35 cents
- E*Trade Financial stands at $0.61
- Friends Fannie Mae and Freddie Mac share the misery at 36 cents each
Some other players may be part of the race to the downside:
- Ford ($1.70)
- Las Vegas Sands ($1.77)
- MGM ($1.99)
- New York Times ($4.07)
- News Corp ($6.00)
- GE ($7.06)
- Dow Chemical ($7.11)
- Wells Fargo ($8.61)
These may look very cheap stocks and without knowing that the economy is still not showing signs of recovery, you might be easily deceived to make these stocks part of your portfolio. The banks alone, BAC, WFC and C, still have a lot to go fixing their companies (or the indstry overall). Bank of America alone still has the ongoing saga with Merrill Lynch and the NY Attorney General’s office. They still contain the toxic assets which until removed from their system would probably not see them recover from this slump. Don’t forget that the government and Tim Geithner’s office haven’t really produced anything worth cheering about.
Then there’s the insurer AIG and the fourth bailout in 5 months. They are in about the same situation as the banks, only magnified. If they’re too big to fail then bailing out is probably not the solution. What’s needed is for them to be small enough to fail, hence, the need to break them down and let go of the more profitable divisions in order to prevent the downward spiral of completely bringing the whole firm down. After all, it’s onle the firm’s hedge fund that is dragging AIG to its downfall.
Dow Chemical is still in the “trying” stage of pushing through with the Rohm and Haas takeover. The deal with Petrochemicals Industries Co. of Kuwait to form a 50-50 K-Dow Petrochemical joint venture has become uncertain as the plunge in the prices of commodities made it difficult for the Kuwaiti firm to complete the transaction. Now ROH is suing DOW for failing to complete the transaction, which had a deadline of January 27, and to force them to do so.
New York Times and News Corp. will probably continuously see slump in their businesses as ad placements remain troubled. If it’s any consolation, the misery is shared by the whole media industry
Las Vegas Sands and MGM. It’s one thing when there’s not very many people who go to Vegas to gamble anymore. And it’s another when you warn the public about the possibility of defaulting. That’s the situation MGM finds itself in. Down 40% just this week, it has gone down 30% since it made the announcement on Tuesday. This bad news is compounded by the failure to reach a deal with Deutsche Bank to finance their CityCenter project with Dubai World in the amount of $1.2bn loan, potentially in exchange of a stake in the project.
General Electric is still in shaky grounds even after dividends have been cut more than 60% last week. Company CFO defended the company saying they are still doing well and the downward trend seen by its stock the past two weeks are attributed to the speculation and CDS plays that is prevailing in the market. Trading last at $7.06, there’s a significant open interest in the March 5 as well as March 6 puts.
Maybe some of these look attractive from a valuation standpoint, but in deciding which one to buy, take note about the troubles they still have to spare you the trouble of losing money.