TOM LEE: Stay Away From These 9 Stocks

Fundstrat Global Advisors’ Tom Lee has screened the market for stocks that he believes are going nowhere or going down.

He found nine.

“The nine avoid ideas are based on the seven industries with the greatest positive dislocation and hence more likely to correct,” Lee wrote in a note to clients.

All of the names on the list are in the electric utilities industry. They have a P/E ratio (2015 estimate) of greater than 15.0x, and free cash flow yield of less than 2%.

Lee believes the S&P 500 and Dow Jones Industrial Average could double in five years. But these nine names are expected to be a drag.

Pepco Holdings, Inc.

Ticker: POM

Current Price: $US27.00

Upside: 0%

2015 Expected P/E Ratio: 20.5x

Comment: Pepco Holdings shareholders voted to approve a merger with Excelon Corporation in September, expected to form the largest electric and gas company in the Mid-Atlantic region.

Source: Fundstrat

Portland General Electric

Ticker: POR

Current Price: $US35.62

Upside: -0%

2015 Expected P/E Ratio: 15.7x

Comment: Portland General's Q3 profit is expected to rise 20% to 48 cents per share. It will report earnings before market open on October 28.

Source: Fundstrat

Pinnacle West Capital Corporation

Ticker: PNW

Current Price: $US59.10

Upside: -1%

2015 Expected P/E Ratio: 15.3x

Comment: The company is based in Arizona and its subsidiary, APS, is a leading producer of solar technology.

Source: Fundstrat

Unitil Corporation

Ticker: UTL

Current Price: $US34.11

Upside: -2%

2015 Expected P/E Ratio: 18.2x

Comment: Unitil posted net income of $US1.6 million or 11 cents per share in 3Q 2014, an increase of $US1 million from the period same period last year.

Source: Fundstrat

Xcel Energy Inc.

Ticker: XEL

Current Price: $US32.70

Upside: -2%

2015 Expected P/E Ratio: 15.6x

Comment: Xcel Energy will close its two remaining coal-fire units in Minnesota by April 2015 for regulatory reasons.

Source: Fundstrat

Duke Energy Corporation

Ticker: DUK

Current Price: $US80.07

Upside: -3%

2015 Expected P/E Ratio: 16.8x

Comment: Duke Energy raised its 2014
adjusted earnings guidance range from $US4.45 to $US4.60 per share to $US4.50 to $US4.65 per share.

Source: Fundstrat

Southern Company

Ticker: SO

Current Price: $US47.21

Upside: -6%

2015 Expected P/E Ratio: 16.5x

Comment: Southern Company owns four electric utilities -- Alabama Power, Georgia Power, Gulf Power, and Mississippi Power -- serving 4.4 million people.

Source: Fundstrat

Hawaiian Electric Industries

Ticker: HE

Current Price: $US27.25

Upside: -6%

2015 Expected P/E Ratio: 16.0x

Comment: Hawaiian Electric reported net income for the second quarter of 2014 of $US41.4 million, or $US0.41 diluted earnings per share (EPS), versus $US40.6 million, or $US0.41 diluted EPS for the second quarter of 2013.

Source: Fundstrat

Empire District Electric Company

Ticker: EDE

Current Price: $US26.70

Upside: -8%

2015 Expected P/E Ratio: 17.2x

Comment: Empire District Electric's share price hit a 52-week high on October 22, peaking at $US26.61 after opening at $US26.11.

Source: Fundstrat

And these are the stocks nobody wants in their portfolio

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