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Should You Reduce Your Holdings of These 2 Companies?

Shareholders of Grupo Financiero Galicia S.A. (NASDAQ:GGAL) and Brookdale Senior Living Inc. (NYSE:BKD) are disappointed because their companies have underperformed S&P 500 Index, which is the benchmark for U.S.-listed stocks, over the past several years.

Moreover, these holdings either pay a paltry dividend or do not pay a dividend at all.

Analysts on Wall Street have also revised the recommendation rating for these two stocks downward.


Thus, shareholders should consider reducing their positions in Grupo Financiero Galicia and Brookdale Senior Living.

Grupo Financiero Galicia

Shares of Grupo Financiero Galicia have fallen 56% so far this year, 51.8% over the last 52 weeks and 21.7% over the last five years through Wednesday. The stock has underperformed the S&P 500 by 79.8%, 69% and 72% over these periods.

The dividend paid is a scant 30.7 cents per common share, and only once per year.

The Argentine regional bank closed at $12.5 per share on Wednesday for a market capitalization of $1.79 billion. The stock has a price-earnings ratio of 3.73 versus the industry median of 11.77 and a price-sales ratio of 1.11 compared to the industry median of 2.87. The stock seems cheap, but this is because the share price declined. Regardless of the sharp drop in the share price, the stock is not oversold yet as indicated by a 14-day relative strength index of 53.

Grupo Financiero Galicia has a moderate sell recommendation with an average target price of $11 to hit within 52 weeks, reflecting 12% downside from Wednesday's closing price.

GuruFocus assigned a moderate rating of 4 out of 10 for the company's financial strength and a 5 out of 10 rating for its profitability.

Brookdale Senior Living

Shares of Brookdale Senior Living have climbed only 6% year to date and have declined 9.6% over the past year and tumbled 80% over the past five years through Wednesday. Over these periods, the stock has underperformed the S&P 500 Index by 17.5%, 27% and 130.4%.

Brookdale Senior Living stopped paying dividends in 2008.

Shares of the Brentwood, Tennessee-based owner and operator of senior living communities closed at $7.07 on Wednesday for a market capitalization of $1.31 billion. The stock has a price-owner-earnings ratio of 49.79 versus the industry median of 27.67 and a price-sales ratio of 0.32 compared to the industry median of 1.59.

Shareholders have seen an improvement in the share price so far this year, but this does not cancel out years of very poor performance. In addition, the 14-day relative strength index of 37 is not far from oversold levels.

Analysts established an average target price of $8.83, reflecting nearly 25% upside from Wednesday's closing price. However, it also has a moderate sell recommendation rating.

GuruFocus issued a low rating of 2 out of 10 for the company's financial strength and of 3 out of 10 rating for its profitability.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.