Yesterday, we published an article on five best financial stocks to invest. Today we focus on five worst financial stocks which investors should avoid.
American International Group Inc (NYSE: AIG): Even asset sale won’t be sufficient to pay back the TARP money
AIG is currently trading at $16.19, significantly up from its 52 week low price of $6.6. However, the current stock price is no way comparable to its 52 week high price of $621.8. The stock is not expected to come close let alone break the 52 week high price of $621.8. In the twelve month period ending December 2009, AIG stock is definitely not going to appreciate. I am bearish on the stock for the following reasons.
Generally it is better, for individual investors with short term view, to avoid stocks in the process of restructuring. According to The Wall Street Journal, AIG's restructuring is going to take years and probably be a long and painful process. AIG initially set out to sell off its big-ticket assets quickly last fall to pay back the federal loan, but the plan foundered. Now, AIG is working on a new, long-term plan, after a March 2 revision of the bailout eased the financial pressure on the company. So far AIG has sold off $5.7 billion in assets in order to pay back the $180 billion it owes the government. I am not convinced that AIG will be able to pay back the TARP money.
Freddie Mac (NYSE: FRE): pressured by customers’ declining home equity
FRE is currently a penny stock trading at $0.59. The current stock price significantly up from its 52 week low price of $0.25 but falls short of its 52 week high price of $15.25. I don’t expect the stock to cross $1 mark in the next two years. In the twelve month period ending December 2009, FRE stock is definitely not going to appreciate. I am bearish on the stock for the following reasons.
In a recent presentation, Freddie Mac pointed out that (Foreclosure Waters Rising Fast), 17% of all homeowners (well, those that have mortgages that Freddie is involved with) owe more on their homes than they are currently worth. An additional 11% have less than 10% equity. The people who are already slightly underwater would be pushed to the point where not ruthlessly defaulting becomes not a mark of honesty and integrity, but of stupidity. Despite president Obama’s administration’s stimulus package, mortgage companies are not going to make money even in the remainder of 2009.
Sallie Mae (NYSE: SLM): pulled down by non-performing student loan weight
SLM is currently trading at $9.54, significantly up from its 52 week low price of $3.11. However, the current stock price is way below its 52 week high price of $19.47.
