The Hunny Club

Have you heard of the Hundred Hundred Club?

It’s a club you’ve got to know about... to know what to avoid...

It’s an honor to get into the “Hunny” Club. Very few get in. But as history shows, nobody gets out alive...

Today I’ll explain the prestigious nature of the Hunny Club, what companies are on the brink of getting in, and why you must absolutely avoid stocks that get there.

JOINING THE CLUB...AND GETTING OBLITERATED

In March of 2000, JDS Uniphase (JDSU) joined the Hunny Club.

JDS Uniphase shareholders were no doubt ecstatic. JDSU shares had risen from less than $5 in late 1998 to over $100 a share 18 months later, when JDSU joined The Club. $5,000 invested in JDSU would have turned into over $100,000.

Ah, but JDSU was not going to stay in The Club for long. The moment was fleeting.

From a peak near $150 in March of 2000, JDSU tumbled to below $2 a share - in just 18 months. $100,000 invested would have turned into $1,000. Here’s a look at the boom, and the bust, from 1998 to 2002 in JDSU:

JDSU has never recovered. To this day, JDSU shares are down 96% from their March 7, 2000 levels.

On March 7, 2000, JDSU was not alone in The Club. Seven stocks were in The Club on that day. On average, these seven stocks lost over 90% of their value in the 18 months that followed.

To this day, The Club’s very best performer - Time Warner - is still down 64%. The average fall of these seven companies – nearly six years later - is over 80%.

Take a look:

The Hunny Club on March 7, 2000:  
The $100 Billion, 100 Times Earnings Club

Back in March of 2000, these companies were among the 30 largest companies in America. And all were crushed.

So what’s The Hundred Hundred Club? To qualify for membership, a company must have a market value of over $100 billion and a price-to-earnings ratio greater than 100. In short, it’s a list of the most over hyped, overvalued big companies in the stock market.

So who’s in The Club today?

Out of the 30 largest companies in America, only one comes remotely close to making it in the Hunny Club. And that’s Google (GOOG).

Google’s market value is $111 billion. And it trades at a P/E ratio of 89. If Google’s high valuation gets a little higher, its invitation will arrive shortly.

For comparison, out of the 30 or so companies that are larger than Google, Microsoft is the second most expensive behind Google. Here are the comparisons:

There are plenty of people excited about Google’s stock. But I know all I need to know... Google’s knocking on the door of the Hundred Hundred Club.

It’s a prestigious club to be in...one that leads to share price obliteration...in all cases.

Will things be “different this time” in Google’s case? I, for one, am not betting on it.

At DailyWealth, we look for low-risk, high-reward investments. To us, Google represents the opposite. If you've got GOOG, get rid of it. You've got a Hunny Club stock. It's nice on the way up. But once it gets in The Club, it's living on borrowed time. Get out before it's too late.

Good investing,

Steve