10 Dogs of the S&P 500

Jim Cramer spent some time on yesterday’s Mad Money to discuss the dogs of the S&P 500. Sure sometimes even dogs have their day in the sun. Cramer referenced Nvidia’s recent run as proof.

 

However, most dogs are cheap for a reason. Too many value investors are sucked into a stock because of how “cheap” it appears. Unfortunately, if the stock is really a dog it will only keep getting cheaper.

 

Here is Jim Cramer’s list of the 10 Dogs of the S&P 500, although some have the potential to become winners.

 

1. Dean Foods

Cramer sees this stock as the “ugliest dog” of the S&P 500. This milk producer is dealing with overcapacity and a lack of new product cycles.

 

2. H&R Block

HRB stock is down 47% from last year. The tax preparer continues to lose share to Intuit. Cramer thinks the Intuit vs. H&R Block battle looks a lot like the Netflix vs. Blockbuster conflict. We know how that turned out….

 

3. Apollo

For-profit college stocks were crushed last year. Unfortunately, for Apollo there doesn’t appear to be any compelling reason to own the stock right now with the potential for further issues with bad student loans.

 

4. Diamond Offhsore

After falling 34% and with a huge dividend yield, dividend investors are likely tempted by Diamond Offshore. However, the company is stuck with the wrong rigs and is being outperformed by Schlumberger and Weatherford.

 

5. SuperValu

The dividend aristocrat got hammered because of a badly executed acquisition last year. The highly competitive grocery sector makes this a difficult play in 2011 too.

 

6. Western Digital

Nobody is too excited about WDC’s products and the stock has already rallied too much.

 

7. Pulte Homes

Pulte is the nation’s largest homebuilder which explains its 25% decline last year. Cramer has predicted a housing comeback in the past, but he thinks the housing sector could just coast along until 2012. For investors looking for a housing play, Cramer prefers Bank of America.

 

8. Micron

Micron’s flash business has potential and there are rumors that the company could be getting involved with Apple. While the stock did post a big earnings miss last month, but the stock is cheap and trades at a low multiple of 8.

 

9. AK Steel

Unlike the other stocks on this list, Cramer doesn’t see AK Steel as a value trap. The stock has already started to rally and Cramer sees more upside ahead as aluminum and steel prices recover. However, he still prefers Nucor with their 3.3% dividend yield.

 

10. Southwestern

Rock bottom natural gas prices have significantly impacted Southwestern lately. However, Cramer thinks natural gas prices should stabilize soon which could lead to big profits from Southwestern.

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