Drop Your Shoe Stocks: Five Stocks for Investors to Avoid

Just because the market is up two days in a row is no reason for investors to start buying just any old stock. While there are a number of high PowerRating opportunities available, there are still plenty of stocks that investors should steer clear of if they want to own stocks that are likely to be higher in a year's time.

Sometimes these stocks are scattered across the stock market universe. But other times these stocks are all gathered in one miserable industry, such as Residential Construction. Residential Construction is an industry group with a PowerRating of 1. This makes the group one of the worst places for investors to look for stocks that will be higher in a year. This industry group includes not just a few low PowerRating stocks, but six stocks with PowerRatings of 2 and another six stocks with PowerRatings of 1 - our lowest possible ratings.

Truly if there is an industry that stock investors should avoid, Residential Construction is it.

While it may not take much sleuthing to figure out that the Residential Construction industry has fallen on hard times. But it may come as a surprise to know that other industries can be similarly riddled with low PowerRatings stocks. One such industry is the Textiles-Apparel Footwear and Accessories, which has a number of low PowerRatings stocks that investors should be wary of.

What is interesting about the low PowerRatings stocks in this group is that some of the stocks represent companies with products that are (or at least were) quite popular with consumers. If the stocks of these companies remain under pressure, then it will be worth seeing if some of the new styles in footwear that these companies introduced in recent years were true stylistic innovations, new ideas easily copied by rivals, or merely fads for fickle consumers.

Three of the five footwear companies in today's discussion have PowerRatings of 3. This puts these stocks into the 'Avoid Buying' category based on our research into thousands and thousands of simulated stock trades going back to 1995. We found that stocks with PowerRatings of 3 were both less reliable and less sturdy performers compared to the average stock. Specifically, we learned that 3-rated stocks tended to be higher one year later less than 45% of the time. Compare that reliability to that of the average stock, which was higher one year later approximately 67% of the time.

In terms of performance, 3-rated stocks also disappoint. While the average stock has been higher after one year by 12-13% on average since 1995, stocks with PowerRatings of 3 have tended to gain approximately 8% in a year's time.

These 3-rated footwear stocks are The Timberland Company (TBL | news | PowerRating | PR Charts ), Sketchers USA (SKX | news | PowerRating | PR Charts ), and Decker's Outdoor Corporation (DECK | news | PowerRating | PR Charts ). All three companies manufacture high quality, unique branded footwear and accessories for men, women and children. Decker's in particular makes a line of popular sport sandals.

The Timberland Company

Sketchers USA

Decker's Outdoor Corporation

Rounding out our 'bottom five' are two more footwear manufacturers, Volcom Inc. (VLCM | news | PowerRating | PR Charts ) and Crocs Inc. (CROX | news | PowerRating | PR Charts ). Both of these stocks have PowerRatings of 2. Our research found that stocks with PowerRatings of 2 have been even less reliable and poorer performers than stocks with PowerRatings of 3. 2-rated stocks have been higher one year later less than 42% of the time. These stocks have also tended to gain less than 8% after one year.

Volcom Inc.

Crocs, Inc.