Though we are in the midst of an unexpected bull market, dozens of stocks have been recently downgraded in our exclusive POWR Ratings system to either “Sell” or “Strong Sell.” 

These downgrades should not necessarily pook investors into bucking the overall bullish trend and liquidating their portfolios. Rather, it appears as though the market is diverging between the safe havens of tech and precious metals, and unfavorable sectors such as restaurants, apparel, retail and traditional finance.

The POWR Ratings are updated on a daily basis to reflect the dynamics of the market. Blackberry (BB), Fiesta Restaurant Group (FRGI), Outfront Media (OUT) and Nordstrom (JWN) are four stocks that have been recently downgraded.

Blackberry (BB), Rated “D” – Sell

It was not long ago when Blackberry phones were used by business professionals across the land. Nowadays, BB is focused on enterprise mobility management software that links mobile computing devices to endpoints. Though BB deserves credit for its pivot toward software, the transition has posed clear challenges.

The POWR Ratings have BB rated as a D largely because of its poor Trade Grade (D) and Buy & Hold Grade (D). The stock is ranked in the bottom half of all Telecom – Domestic stocks. Though BB’s price returns for the past month and three months are in the green, its price returns are in the red for the past six months, year, three years and five years. Furthermore, BB has an unjustifiably high forward P/E ratio in excess of 100.

Fiesta Restaurant Group (FRGI), Rated “F” – Strong Sell

The days of taking the family to a sit-down restaurant for lunch or dinner are slowly returning. However, plenty of people will continue to avoid restaurants such as Taco Cabana and Pollo Tropical, both owned by FRGI.

Mexican food is still on-trend yet the masses are inclined to hit up the drive-thru, order takeout or simply make their own meals at home. As a result, the POWR Ratings have FRGI ranked 43 of 48 in the Restaurants category.

FRGI’s POWR Components are quite ugly: F Trade Grade, F Buy & Hold Grade and a D Peer Grade. FRGI’s price returns are deep in the red but for its three-month price return of +33%.

Outfront Media (OUT), Rated “F” – Strong Sell

Conventional outbound advertisements on billboards, digital displays and transit displays are quickly being upended in favor of inbound marketing strategies on the web. This shift does not bode well for OUT.

Though OUT provides advertising services to the United States’ largest markets as well as some Canadian markets, it is clear the money is moving toward inbound marketing on the internet that zeros in on those who demonstrate a need or desire for a specific value offering.

The POWR Ratings have OUT ranked dead last of eight stocks in the Advertising space. OUT’s six-month price return is -42%. The company’s one-year price return is -40%. Making matters worse is the fact that the company’s price returns in the three and five-year time spans are also in the red.

Advertising is one of the first expenses cut when the economy sours. This means OUT will likely continue to offer low or no-cost advertising for the foreseeable future in a desperate attempt to snag new clients and encourage consumer spending through advertising.

Nordstrom (JWN), Rated “F” – Strong Sell

Fashion specialty retailers at brick-and-mortar stores are out while online shopping is in. This means the likes of JWN will struggle in the months to come. People are looking for bargain bin clothing as opposed to JWN’s upscale items. If the economy does not pick back up, JWN is likely to go out of business for good.

JWN is currently priced above the analysts’ average price target for the stock of $18.20. The POWR Ratings have JWN ranked 50 of 65 stocks in the Fashion & Luxury space. The stock has a -55% price return across six months, a -44% price return across the past year and a putrid -72% price return across the past five years.

Look for JWN to continue store closings in the months and years to come as more consumers shift to online shopping and favor retail chains with comparably affordable apparel offerings.

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JWN shares were trading at $17.07 per share on Friday afternoon, down $1.15 (-6.31%). Year-to-date, JWN has declined -57.76%, versus a -3.54% 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...

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