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2 Underperforming Stocks to Reduce

GuruFocus.com
·3 mins read

Shareholders of Bank of East Asia Ltd (BKEAY) and Avanos Medical Inc (NYSE:AVNS) may have reason to be dissatisfied with their holdings.

First of all, these companies have underperformed the U.S. market significantly over the past year, two years and five years. The S&P 500 index, which is a benchmark for the U.S. market, has gained about 7% in the past year, 44% over the past two years and 44% over the past five years.


Second, they either do not pay dividends or they have reduced the dividend significantly over the past couple of years.

Third, sell-side analysts on Wall Street have issued negative recommendation ratings for them.

Bank of East Asia

Shares of Bank of East Asia Ltd have lost 38.2% in the past year, 52.3% over the past two years and 44.7% over the past five years through Feb. 27. The Hong Kong-based regional bank has underperformed the U.S. market by 45.2%, 59.3% and 73.3%, respectively.

In 2019, the company paid a total dividend of 10 cents per common share, of which 5.5 cents were through semi-annual distributions and 4.5 cents were through a special dividend. The regional bank has significantly reduced the payment in the past year, down 61% from 14.1 cents per common share in 2018.

Wall Street sell-side analysts issued an underweight recommendation rating for this stock with an average target price of $2.10 per share.

The below chart shows that the share price started 2020 continuing its downtrend. It lost 4% so far this year, closing at $2.10 on Thursday for a market capitalization of $6.1 billion.

The 14-day relative strength index of 39 suggests the stock is not far from oversold levels.

Avanos Medical

Shares of Avanos Medical Inc have declined by 32% in the past year, 33% in the past two years and 29.5% in the past five years through Feb. 27, underperforming the U.S. market by 39%, 40% and 73.5%, respectively.

The Alpharetta, Georgia-based provider of medical device solutions does not pay a dividend.

Wall Street sell-side analysts issued a moderate sell recommendation rating for this stock with an average price target of $32 per share.

Shares of Avanos Medical Inc closed at $32.62 on Thursday for a market capitalization of $1.56 billion. The stock is down about 3% so far this year, and the 14-day Relative Strength Indicator of 58 indicates that it is not oversold.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.