Due to the strong market, many stocks with poor fundamentals in sectors like energy, travel, and materials have been moving higher. However, some of the weaker names are more vulnerable to selling pressure which is more likely in a down market.
The POWR Ratings can help you identify these stocks especially the list of downgrades to a Strong Sell rating. These stocks have an average annual loss of -19.5% which compares unfavorably to the S&P 500’s 7.3% annual gain.
Below, we provide a look at three stocks recently demoted to Strong Sell ratings: Borr Drilling (BORR), Host Hotels & Resorts (HST), and JetBlue Airways (JBLU).
Borr Drilling (BORR)
BORR is a drilling business that works in the oil and gas industry. BORR performs drilling and is also in the business of acquiring the assets necessary for oil and gas drilling operations. Based in Bermuda, BORR certainly has a scenic headquarters yet the company’s outlook is not exactly easy on the eyes.
BORR has an F POWR Rating grade. The stock has an F grade in the Quality component of the POWR Ratings along with a D Stability Grade and a C Sentiment grade. Click here to find out how BORR grades out in the Growth, Momentum, and Value components of the POWR Ratings.
Of the dozen publicly traded companies in the Energy – Drilling space, BORR is ranked second-to-last. You can find out more about the stocks in this economic sector by clicking here. Though BORR has a 15% price return year to date, the stock had a -91% price return in ’20 and has a three-month price return of -22%.
BORR is treading water after the oil and gas industries were hit hard during the pandemic. The oil demand is certain to spike as people end their extended quarantines yet there is no guarantee the rising tide will keep BORR’s ship afloat.
A recent report out of Norway states two BORR creditors are discussing alternative plans for collecting on BORR’s debts. This is a nasty surprise to BORR investors as the company made it clear that it wanted to close equity issuance along with lender support programs by January’s end. Now that a couple of BORR lenders are not on board with the plan, there is even less reason to own this pandemic loser.
Host Hotels & Resorts (HST)
Based in Bethesda, Maryland, HST claims to be one of the top REITs in the lodging sector. However, the POWR Ratings have HST ranked 19th out of 22 stocks in the REITs – Hotel space. Investors who would like to learn more about the stocks in this space can do so by clicking here.
HST buys and redevelops luxury hotels and other lodging sites throughout the United States and also in foreign lands. The majority of these properties are positioned in expanding markets. In fact, HST has established relationships with some of the industry’s top brands such as Hyatt, Westin, and Marriott. HST’s operations extend to submarkets with unbranded properties that zero in on specific target customer profiles.
Similar to most lodging stocks, HST has struggled as travel came to a grinding halt during the pandemic. The reduction in business has lowered HST’s POWR Rating to F. The stock has an F Growth grade along with Ds in the Quality, Value, and Stability components. Investors who would like to learn how HST fares in the Value, Momentum, and Sentiment components of the POWR Ratings can do so by clicking here.
The analysts are bearish on HST, establishing an average target price of $17.33. If HST were to decline to this level, it would drop by about 4.5%. The majority of analysts who have issued recommendations for HST consider it a hold. Exactly nine such analysts view the stock as a Hold while three consider it a Strong Buy and three consider it a Buy. HST had a 2020 price return of -19%. The stock’s three-year price return is -8%.
JetBlue Airways (JBLU)
JBLU has had a difficult 15 months, largely because hardly anyone was willing to fly due to a fear of the coronavirus. JBLU has the potential to rebound in the years ahead yet the pandemic losses have put the company in a terrible financial position.
JBLU’s sizable first-quarter loss is concerning even though demand jumped in the first quarter. Even if JBLU sells out the majority of the seats on its flights moving forward, the company might not return to profitability for several years. JBLU’s financial fate is tied to Boston and New York, two metropolises that were hit hard by the pandemic. Add in the fact that JBLU is focusing on rampant growth which might not come to fruition due to staffing shortages and there is even more reason to be concerned.
Of the 28 stocks in the airline space, JBLU is ranked 26th. You can learn more about this industry by clicking here.
JBLU is trading a couple of dollars below its 52-week high of $21.96. In other words, this stock is overpriced. Add in the fact that the stock has an F POWR Rating along with Fs in the Stability and Growth components and Ds in the Value and Quality components and there is even more cause for concern. Click here to learn more about how JBLU fares in the remainder of the POWR Ratings components such as Momentum and Sentiment.
JBLU shares were trading at $18.60 per share on Tuesday morning, down $0.67 (-3.48%). Year-to-date, JBLU has gained 27.92%, versus a 10.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
More Resources for the Stocks in this Article
Ticker | POWR Rating | Industry Rank | Rank in Industry |
JBLU | Get Rating | Get Rating | Get Rating |
HST | Get Rating | Get Rating | Get Rating |
BORR | Get Rating | Get Rating | Get Rating |