25 Doomed Blue-Chip Stocks

By TradeSmith Research Team

Heavyweight players like Amazon.com (AMZN), Apple (AAPL), Walt Disney (DIS), and Tesla (TSLA) are some of the most widely held stocks in the market today. 

You may even own them yourself. 

And yet… I wouldn’t recommend buying any of them right now. 

My stock-picking system — which incorporates all the lessons I learned during my decades on Wall Street — won’t just make you money; it’ll steer you clear of the stocks that can depth-charge your portfolio

I’ve tested the system up, down, left, and right, and the numbers bear it out — to the tune of a 70% success rate as of my last test in 2019. 

Before I give the list of popular stocks you immediately need to put on your “do-not-buy” list, let me briefly show you how I rate stocks and which ingredients help us determine a stock’s potential. 

If You Want to Win, You Need This… 

The seeds of this system were sown during my time with Cantor Fitzgerald — one of the famed New York investment banks. I headed a trading desk and matched up buyers and sellers of stocks, ETFs, indexes, and their associated derivatives. 

I’m talking big buyers and sellers.

My clients were institutions, meaning each of my “matchmaker” deals was worth millions of dollars. I had a vantage point few others shared — a veritable box seat that let me watch how Big Money moved stocks. 

I’ve spent the last 20 years — and hundreds of thousands of dollars in money and other resources — developing a system that shows me what stocks to buy, what stocks to sell… and precisely when to make those moves. 

During my work, I made a breakthrough discovery. I identified the single secret to winning investing. I found the one thing that makes stocks rocket… and that also causes them to tumble. 

I refer to this “one thing” as “Big Money.” 

You see, stocks soar when big institutions are buying. And they drop — sometimes like a burned-out meteor — when those hefty players sell. 

If that sounds super simple — or blatantly obvious — that’s because it is… in theory. But in practice, identifying Big Money moves in a real-time basis is virtually impossible for smaller institutions… or retail investors. 

Big Money players aren’t just smart — they’re shrewdly brilliant. They know how to spread their trades around, to cover their tracks — to keep even the best stock-market bloodhounds from spotting their moves. And, yes, these Big Money institutions must eventually disclose their accumulative purchases and their hoard-divesting sales. But the rules allow them to delay their regulatory filings by weeks or even months — meaning the disclosures are very much a “lagging” indicator. 

My system IDs what Big Money is buying and selling on a daily basis. When I combine those money-flow insights with detailed financial assessments of the underlying company and momentum trends related to the stocks themselves, I end up with one of the strongest stock-picking systems I’ve ever seen.

Strong… and yet powerfully simple. 

I’m able to distill all this information down to a single number — a numerical score from zero to 99 that tells you at a single glance whether a stock is a buy, sell, or “avoid.” 

I call it the “Quantum Score.” 

Don’t be fooled by the Quantum Score’s single-number simplicity. 

That number is the product of massive data collection, relentless number crunching, and disciplined analysis. That’s why I wrote heavy-duty algorithms that run on powerful computers. Thanks to technology, I can get done in minutes what would take an individual — or even a team of Wall Street “quants” — days or even weeks to accomplish. 

And it’s not even clear that those quants are crunching the “right” numbers. After all, as a 2020 research study underscored, nearly 90% of actively managed funds failed to beat the market

Before writing my algorithm, I talked to managers of multibillion-dollar hedge funds, folks who ran M&A and arbitrage desks, and any successful pro I met. I asked them what they looked for in stocks. 

I came away with a list of raw ingredients, but then I needed to perfect the recipe. I analyzed them thoroughly and kept what proved to be the most predictive factors in my extensive backtesting. 

I was left with a “shortlist” of critical factors — data-like x-rays that peer deep inside a stock.

Secrets of the Quantum Score 

The Quantum Score is an amalgamation of a stock’s technical strength, fundamental strength, and institutional support. 

The bottom line: You want to own stocks that are strongest fundamentally and technically, and that Big Money is buying. 

The first step is to weed out all but the best of the best companies, and I start by analyzing the fundamentals. As I mentioned earlier, there are more than 10,000 stocks trading on public exchanges. But I immediately eliminate the 40% that are way too risky to invest in. They are either too small, trade with too little volume, or are penny stocks. May as well go to Las Vegas. 

That still leaves us with a substantial list of 6,000 to 6,500 stocks. I then layer on the fundamental screens I’ve developed to make sure the business is healthy and growing. 

It’s a proprietary system, so I can’t reveal it all here (and, in fact, hedge funds and institutions pay me a lot of money for it). 

But I can share a bit of what I’m looking for. 

When it comes to fundamentals, some of the “predictive” numbers include specific levels of sales and profit growth, profit margins, debt, and valuations. 

After eliminating stocks that fail to make that cut, I then run the survivors through proprietary technical “screens.” Technicals — measures of momentum — actually make up more than half of the overall Quantum Score — 58% to be exact. If that surprises you, think about one of Newton’s laws of physics: An object in motion stays in motion.

Turns out the physics of objects holds true for stocks — my research proves it. Stocks that are moving higher tend to keep moving higher — often for much longer than so-called “momentum investors” would have you believe. 

But price action alone is insufficient to measure a stock’s technical health, so my algorithms analyze more than 20 other factors to zero in on the handful of stocks that are really “on the move” toward higher prices. Those include stocks that are trending positive, preferably on strong volume, that are trading near recent highs, and that are showing strong “relative strength” compared to their historical trading patterns as well as their brethren. 

And finally, we get back to where it all started. I get out my magnifying glass and look for those Big Money footprints. Those footprints are invisible to most other investors — but not to me. I’ve seen them from all angles, and I developed my Quantum Score to summarize all this number-crunching in a single, powerful number. 

From there, it’s simple. You want to own the stocks with the best scores… and avoid the stocks with the worst scores. 

My system is predictive. It’s powerful. It’s profitable. 

And it’s fully legal. 

Our Quantum Score In Action 

Before we get to the list of widely held “toxic stocks” to avoid at all costs, let me tell the tale of a one-time “limelight” stock that illustrates a lot of the lessons I’ve already shared. I’m talking about the shares of Teladoc (TDOC), a firm that provides virtual healthcare services and that was a Wall Street darling during the COVID-19 pandemic. 

Teladoc’s fundamentals (37.5 at the time of writing) are generally poor — especially earnings growth and debt. The company’s stock dead-dropped 75% in 2022 and throughout most of 2023 — so, as you’d expect, its technicals are equally poor.

And, not surprisingly, Big Money isn’t buying. 

In fact, I’ll give you a peek inside my system. TDOC generated just two Big Money buy signals this year — and those were back in August following an all-too-brief rally. You can see that lonely “buy” signal on the chart below — the green line — with way more red “sell” signals throughout the year. 

As a result, its Quantum Score is right around 26 as I write this.

That’s not the worst you’ll find by any means, and if the stock rallies a bit because it is oversold, the Technical Score can improve. But when you add the concerning fundamentals and lack of Big Money interest, TDOC is a stock to avoid. 

Beware of These Stocks 

Now that you know a little bit about how my system works, let’s talk about some of those bigger stocks you may want to avoid. Or run from. 

Here is a list of blue-chip stocks — some better known than others, but all big companies whose shares are probably in a lot of investor portfolios right now. None feature strong Quantum Scores — meaning they’re not the best investments right now. 

And in a rocky market, they could be downright lousy.

I am not saying these stocks are going to crash. Blue chips don’t crash as much or as often as microcaps. But based on what I see of their fundamentals, technicals, and institutional support, they are not good places to make money right now. 

You may have noticed some variations in the scores. For example, a few of the stocks have an acceptable and even solid Fundamental Score. Keep in mind that the value of my system is the combined analysis and weighting of multiple critical factors. 

When you see a strong Fundamental Score but a low Quantum Score, it means the weak technicals and/or Big Money activity drag them down enough that they are not good stocks to own — as portrayed above with the low technical scores. Keep in mind, though, that when there’s extremely weak technicals, this means the stock could stay down for a long time OR it could bounce.

Putting It All to Work 

And that brings me to one final thought. 

These scores change regularly, which is why I run my algorithms and conduct my own analysis daily. 

If any of those stocks above with good fundamentals turn higher and Big Money starts to buy, you have the makings of a winner. 

Here in Quantum Edge Trader, I’ll share much more about our system, how we can use it to gauge the health of stocks and the market, and where the Big Money is flowing. 

In other words, I’ll help you find the best stocks to own and the weakest stocks to avoid. 

Talk soon, 

Jason Bodner
Editor, Quantum Edge Trader