Certain shares may appear enticing now but they could poison your portfolio later. On the list: Valero, Williams-Sonoma, and WinnebagoBullish noises for the market abound. Fed Chairman Ben Bernanke makes it clear that he's prepared to pull out all the stops to prevent economic collapse, and Treasury Secretary Henry Paulson is talking up broad investor-friendly reforms for market regulators. And, while still behind the fiscal curve, Congress is finally recognizing that emergency measures are needed to help alleviate homeowners' pain and to help prevent a financial catastrophe.
With the close of a dismal first quarter, there hangs a faint whiff of optimism in the air over Wall Street. But a warning to investors ready to plunge into the market: Beware of land mines. Even if you think you know perfectly well which stocks are safe, the current market remains a beehive of hazards. Watch out, first of all, for "toxic" stocks that may appear enticing now, but could poison your portfolio at this critical stage of the market.
In investing, spotting stocks that could implode is as important as picking the potential winners. With the market as volatile as it is, it would be wise for investors to expect a surprise that could swing stocks skyward, in which case droves of investors would flood in, enthused to buy. But an equally compelling case can be made that the market will deliver a negative surprise, ensuring further chaos. Either way, it is essential to guard against "time-bomb" stocks, especially now when the market is displaying signs that the bull is ready to ram the gates.
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