Investing in Well-Known Companies? Watch Out for These Guys

AMZN, AAPL, EBAY, KNM, SHLD, TR, CZR

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A quick perusal of the most popular by volume stocks on the market on a given day (in this case, April 6) reveals that they’re pretty much all household names: Bank of America (BAC) , Facebook Inc. (FB) , Cisco Systems (CSCO) , Pfizer (PFE) , and so on. Really, in the top ten of shares traded, the only non-ETF stock that the average American wouldn’t at least have a passing familiarity with is semiconductor manufacturer Micron Technologies (MU) , which is pretty popular regardless of name obscurity because of its fantastic returns over the last year.

This is because the average investor tends to want to invest in what they know. Better to put your money in Facebook, something over a billion people use, than Obscure Technology Company or Tiny Biopharmaceutical with Hard to Pronounce Name, goes the thinking. There’s nothing inherently wrong with investing in a company with high name recognition. Ask anyone who sunk money into Apple Inc. (AAPL) before 2004. But some household names that are better than others. Much, much better.

These companies have the dubious distinction of both being recognizable by the Average Joe or Jane and being trashed by a majority of analysts. That is, the current analyst consensus is sell, a rating so bad less than one percent of stocks carry the distinction.

Here’s the Household Name Wall of Shame:

Caesar’s Entertainment Corp. (CZR)

Market Cap: $2.36 billion

Price: $17.23

The Las Vegas-based casino and hotel empire is already down 20 percent on the year, and Wall Street experts still don’t like their chances. While the injection of $500 million in private equity in April 2013 briefly energized investors, the gaming company is currently operating at a profit margin of negative 37 percent.   

Konami Corp (KNM)

Market Cap: $3.30 billion

Price: $22.69

This videogame maker dominated the 80s and early 90s, and franchises such as Yu-Gi-Oh! and Metal Gear remain highly popular. However, in the 2010s, analysts absolutely loathe the stock, giving it the dubious “strong sell” rating. However, it should be noted that despite the bearishness, Konami is only down a scant .40 percent on the year.  

Sears Holdings Corporation (SHLD)

Market Cap: $4.06 billion

Price: $38.10

Poor Sears. Although they were once on the cutting edge of retail – with their famous mail-order business spearheading the consumer movement towards shopping from home – Sears is now finding themselves at the losing end of the retail wars, losing out to nimbler competitors Amazon (AMZN) and eBay (EBAY) amid widening losses and shrinking revenues. Sears prospects for a turnaround don’t look to rosy either, and in 2014 the company has already shed 22.31 percent of their value.

Tootsie Roll Corporation (TR)

Market Cap: $1.08 billion

Price: $29.26

This company is a real doozy. Yes, the confectioner gets bad marks from analysts. But this is probably because the company just basically refuses to offer any transparency regarding its business practices. According to the Wall Street Journal, the 118-year-old company does not have conference calls with investors, puts out shoddily put-together earnings reports, and maintains a permanent media blackout. In short, the analysts have little to go on – and thus tend to assume the worst.

The “strong sell” rating then might just be the result of analyst exasperation over the lack of information. However, there still might be something there. The company still appears to post a small profit, and is only down 7.14 percent on the year.


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