Stocks to avoid in 2011

Its a well known lesson in investing that Capital protection should have the higher priority over return on capital. We all talk about which stocks to bet on that can giver superior returns on investment, but it is equally important to know which stocks to avoid to prevent the risk of capital loss. Here is a selective list along with reason:

1. Unitech - A strong avoid at this point in time. Sanjay chandra, the promoter of the company, has been denied bail again by the supreme court on 20th April and has been sent to judicial custody. The stock has been upgraded by some houses to buy just to give themselves and opportunity to exit from their position. Whatever be the asset or land bank of the company, everything will be put on stake if the charges on the company are proved. The probability of things getting worse for the company is higher than things getting better. Avoid bottom fishing in the stock until some clarity emerges.

2. DB Realty - Again a real estate company rumored of having links with underworld. Unitech like situation. A complete avoid for forever.

3. Reliance Communication - Three officials of RCOM has been denied bail. Anil Ambani name is not coming in front because of his influences but whose company is RCOM? Any bad news on this front will bring the stock by more than 20-30 %. So to protect your money this stock should also be avoid at this point.

4. Other ADAG Companies - If Anil Ambani gets trapped in the 2G scam, the shares of all of his company will start correcting sharply. ADAG has a very bad history of shareholders wealth destruction. First RPOWER, then RNRL, then RCOM. So all of his companies should be avoided until some clarity and clear direction emerges for him and his companies.


Anonymous said...

Unitech's property to be seized to compensate for the loss in 2G spectrum allocation. Very true, all the companies are avoid who are involved in 2G case.


Dividend paying stocks said...

Hey that's really an well thought off post which clearly depicts the reasons why one should not invest in these stocks & these are reasons are valid also..Thanks for sharing the information :)

Amit Agarwal said...

Anil Ambani got clean chit from CBI today as far as his involvement in 2G was concerned. Hence the ADAG group stocks now should start the process of bottoming out. Investors with 2 to 3 years horizon can look at RPower, RInfra and Rel Capital. RCom is having huge debt overhang. Hence the stock can still be avoided...

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