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There are some stocks you just root against. I'm not talking about the company itself- but the STOCK. You know which ones I'm talking about. We all have our list.
They're the stocks that make you grimace whenever you see their ticker at the bottom of the screen or "trending" on stocktwits. They're the stocks that when they're down 5% or 10% in one session you secretly go "yes!". You may even check on its earnings to see if it missed for the quarter.
If you're like me, you probably don't even OWN these stocks (but you may have owned them in the past and been burnt- hence the strong feelings). However, there's just something about them, both good and bad, that causes an emotional reaction in us.
Why Is A Stock "Hated"?
There are many stocks that could fall into the "hated" category. But these are some of the main reasons.
1. It's Been a Dead Stock
Some stocks are hated because they haven't gone up in 10 years. They're in the "XYZ hasn't done ANYTHING in a decade. Why did I buy that dog?" camp. Instead of selling the stock, we stay in it and curse the stock year after year.
There are plenty of stocks that seem to have so much promise. Everyone buys in thinking they've found the next "big thing" but when it doesn't work out that way, we turn on the stock. Lots of IPOs end up falling into this category.
3. The Value Trap
Some stocks look so cheap we just HAVE to buy them. What could go wrong? The shares have to go up sometime, right? But when they don't, we turn on the stock. Cheap doesn't mean it's a winner.
4. The Could Have Beens
There is a whole category of "could have been" stocks. You know the ones. Buying Microsoft or Dell in 1990. Buying Starbucks on its IPO. Buying Whole Foods the first time you heard it referred to as Whole Paycheck- which was over a decade ago.
We hate the "could have beens" because we DIDN'T buy them. So we hate the stock because we missed out on a big winner.
3 Stocks We Love To Hate
These are three stocks many people have strong emotions about. There are plenty of others that could be added to this list. But these three invoke strong emotions in most investors. Remember, we're not talking about the company itself here- just the stock.
2. Bank of America
1. Facebook (FB - Analyst Report)
Facebook is not even 2 months old yet and it's already a stock we love to hate. Facebook fits into the "over-hyped" category. Everyone I know bought into the IPO and most of them are now cursing the stock as it was crushed in the ensuing days/weeks since.
It's still early though. Facebook could turn it around and the stock could become one that everyone loves instead. We haven't even had an earnings report yet. A great quarter or two could go a long way to curing the IPO blues.
Zacks #3 Rank (Hold)
Forward P/E of 74
2. Bank of America (BAC - Analyst Report)
Bank of America is in a league all its own. If you just mention the name Bank of America, even to non-investors, you will get a strong reaction. But for stock aficionados, it is THE go-to ticker to check if something is going on in the world of finance. It's the first ticker I check to see what is going on with the big banks if there are rumors of downgrades, stress test results or whatever else.
Still, even though many investors curse it, if you would have bought BAC during the darkest hours of the Great Recession when it was trading around $3, even with the recent weakness in the shares, you would have doubled your money. (See the 5-year chart below.) It's hard to curse that.
Zacks #3 Rank (Hold)
Forward P/E of 13
3. Apple (AAPL - Analyst Report)
Surprised to see Apple on the list? You either love it or hate it. And it all depends on if you are one of those who bought it a decade ago or who have been waiting on the sidelines to buy when it "sells off." This is one of the "could have beens."
Those who hate the stock, curse it because they SHOULD have bought it years ago but didn't. So now they root against it (and all of the rabid Apple boosters who appear on the stock message boards every quarter.)
My take on the "could have beens" is that if you can't beat them, join them.
Zacks #2 Rank (Buy)
Forward P/E of 12.5
Emotions will always play a part in investing.
Even the much "hated" stocks have their cheerleaders and supporters. And sometimes that much maligned stock can turn it around and become one of the most beloved stocks.
You know what they always say: There's a fine line between love and hate.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.