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Friday, November 23, 2012 - 08:00
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Friday, November 23, 2012 - 08:00
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Friday, November 23, 2012 - 08:00

20 Stocks You DO NOT Want to Own Between Now and the Fiscal Cliff

Friday, November 23, 2012 8:00 AM

Investors should steer clear of the stocks that have taken the biggest beating since Election Day. We are likely to see more selling in these stocks.

The market surged on Monday, Nov. 19. Midway through the session, the Dow was up 160 points while the S&P 500 was higher by more than 20 points. The reversal of fortune in stocks Monday was a welcome change from the drubbing many of the market's highest profile entities have suffered since Election Day.

Now, I think most observers, myself included, have attributed the losses in stocks since Nov. 6 to fear over the looming "fiscal cliff," an outcome everyone wants to avoid, but that nobody is certain will actually get fixed.

Fear over a political stalemate on this situation is largely why stocks in the S&P 500, the broadest measure of the large-cap segment of the U.S. equity market, have fallen 4.8% since President Barack Obama was re-elected. Indeed, part of the reason why stocks traded markedly higher on Monday was due to renewed optimism that a deal to avoid driving off the fiscal cliff would be reached. And while I suspect that a deal is probably going to get pushed through, until we know for certain whether that happens, and what that deal actually looks like, I suspect we are going to see more selling in some of the market's most battered big caps.

For investors, this means they should either steer clear or sell the large-cap, S&P 500 stocks that have seen the most downside since Election Day. To find out which stocks fit that bill, I ran a Bloomberg data screen of the worst-performing S&P 500 components from Nov. 6 through Nov. 16.

Below is a list of the 20 worst-performing stocks in the S&P 500 index between Nov. 6 and Nov. 16:

1. J. C. Penney Company (NYSE: JCP): -30.81%

2. Humana Inc. (NYSE: HUM): -14%

3. Peabody Energy Corp. (NYSE: BTU): -13.91%

4. Joy Global (NYSE: JOY): -13.87%

5. Prudential Financial (NYSE: PRU): -13.25%

6. Big Lots (NYSE: BIG): -12.68%

7. NVIDIA Corporation (NASDAQ: NVDA): -12.53%

8. Windstream Corporation (NASDAQ: WIN): -12.4%

9. PulteGroup (NYSE: PHM): -12.35%

10. Devon Energy Corporation (NYSE: DVN): -12.11%

11. SanDisk Corp. (NASDAQ: SNDK): -11.94%

12. Hess Corporation (NYSE: HES): -11.91%

13. DR Horton Inc. (NYSE: DHI): -11.81%

14. Perrigo Co. (NASDAQ: PRGO): -11.68%

15. Applied Materials Inc. (NASDAQ: AMAT): -11.43%

16. Microchip Technology Inc. (NASDAQ: MCHP): -11.41%

17. Leucadia National Corp. (NYSE: LUK): -11.34%

18. Morgan Stanley (NYSE: MS): -11.05%

19. Harman International Industries (NYSE: HAR): -11.02%

20. Noble Corp. (NYSE: NE): -10.97%

There are many marquee names here, including embattled J.C. Penney, which has suffered the wrath of sellers to the tune of a nearly 31% decline since Nov. 6, and lost about 50% year to date (YTD), as of Nov. 16. Other stalwart names that have struggled, and that should be avoided and/or sold by traders right now, are health insurer Humana (down 24.5% YTD), discount retailer Big Lots (down 28% YTD), and tech firms Nvidia (down 18% YTD) and Sandisk (down 20% YTD).

Other stocks on this list have done well year to date, but have come under heavy selling pressure due to profit-taking. Homebuilders have been particularly susceptible, including PulteGroup (up 148% YTD) and DR Horton (up 51% YTD). If you own these, it's time to take profits off the table. There's nothing worse than watching a gain slip away, so protect your profits and exit both of these recent sell-off stocks.

Action to Take --> Once the fiscal cliff issue is off the table, there will likely be a bounce in big-cap stocks. Until then, however, smart investors need to clear their portfolios of the biggest recent losers, especially if there are still profits on the table. Simply put, you don't want to take the risk that these stocks will bounce back from the current selling. If they don't, then you're stuck holding a loser -- and that's one of the biggest traps traders need to avoid.

Jim Woods does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC owns shares of DVN in one or more of its “real money” portfolios.