3 Best Nasdaq Darlings, 3 Duds to Sell

Best and Worst Nasdaq Stocks
to Own Now

Wall Street celebrated when the S&P 500 recently crossed above 1,000, since it was almost exactly a 50% retracement from the March bottom. The
Nasdaq Composite, however, is now up close to 60% from its low. At one point in July, the index rose for an amazing 12 straight days.

Simply put, the Nasdaq has been white-hot, and it’s racking up some of its best gains ever.

But just having four letters to your ticker symbol doesn’t make you a buy according to my award-winning Portfolio Grader
system. My team and I test and retest stocks until we find the very best.

By taking my latest research, let’s run through three of the best and three of the worst Nasdaq stocks to own now.

NEXT: Amazon Is a Strong…

Amazon (AMZN[2]) Is a Strong Buy

Leading off the heroes list is Amazon.com (AMZN[2]). Don’t be fooled into thinking that Amazon is only
about books. Nowadays they sell just about everything that can be sold. The company has been a big help to budget-conscious consumers who have been
squeezed by the recession.

The online bookseller recently reported Q2 earnings of 32 cents per share, which was a penny ahead of expectations. The shares are up an amazing
62% so far this year, and that’s coming off a weak holiday season at the beginning of the year, so I expect a strong finish to 2009.

I rate Amazon an A, or strong buy.

NEXT: Bed Bath & Beyond…

Bed Bath & Beyond (BBBY[3]):
The Surprise Winner

Bed Bath & Beyond (BBBY[3]) is a stock that snuck up on almost everyone this year. Most folks on
Wall Street thought that since housing is dead, house furnishings must be dead, as well.

Guess again. These analysts forget how well run BBBY is.

Plus, one of their top competitors, Linen’s N Things, just went under, which was a big boost for Bed Bath & Beyond’s bottom line. The fact is
that recessions are great for strong businesses — assuming you’re a survivor. The stock was also recently highlighted in Barron’s.

I rate BBBY an A, or strong buy.

NEXT: Ross Stores: Buy or Sell?

Ross Stores (ROST[4]) Benefitting From the Recession

Ross Stores (ROST[4]) is my final strong buy. Are you surprised you haven’t seen a classic tech stock
yet? Don’t be. The theme here is finding the strength in consumer spending. The fact is that consumers are willing to spend as long as they can find
bargains.

Recently, Ross Stores dramatically increased its fiscal year profit guidance to a range of $2.62 per share to $2.72 per share. The previous range
was $2.25 per share to $2.45 per share. That’s a big increase, and it tells me that Ross is thriving while the high-end guys aren’t doing so well.
Their next earnings report is due in two weeks, and I’m expecting 40% earnings growth.

I rate ROST an A, making it an outstanding buy.

NEXT: Three Nasdaq Duds

Dell (DELL[5]) Leads Off the List of Nasdaq Stocks to Shun

Leading off the “stocks to shun” list is Dell (DELL[5]). This one shouldn’t be a big surprise to you.
Dell was a stock superstar during the tech bubble, but it’s fallen on hard times. What Dell used to be good at was strong operating margins, especially
for dealing in a product that’s close to being a commodity.

Unfortunately, the company became complacent, and their competitors started catching up with them. Soon sales and earnings suffered, and today that
stock is merely a shadow of its former self.

Dell may rebound some day, but for now, I rate the stock an F, or strong sell.

NEXT: Electronic Arts Headed for Much Lower Earnings

Electronic Arts (ERTS[6]) Headed for Much Lower Earnings

Electronic Arts (ERTS[6]) was another stock that could do no wrong. The company is famous for its stable
of video games, especially titles like The Sims and Madden NFL. But like Dell, the company started getting cocky.

Last year, they offered to buy Take-Two Interactive (TTWO[7]) for $2 billion, but Take-Two didn’t take
the $2 billion. I knew this was a bad omen. I expect earnings for the third quarter to be about half what they were a year ago.

That’s not a good sign. Even if ERTS hits my earnings forecast for the year, the stock is still overpriced.

If you own ERTS, my advice is to dump it ASAP.

NEXT: Symantec: Volatility With Little Upside Potential

Symantec (SYMC[8]): Volatility With Little Upside Potential

My final stock dud for you is Symantec (SYMC[8]). This company is best known for its Norton line of
computer protection software. One of the dangers in owning shares of Symantec is that the stock is incredibly volatile.

It’s not unusual to see shares of SYMC vault up or down 10% to 20% in a given month. I’m not against volatility, but a stock has to be extra strong
to deserve a passing mark from me, and Symantec doesn’t get it.

The company just reported 34 cents per share, which was a penny below expectations. As a result, the stock plunged 14% in one day. In this environment,
only the strong survive. Expect to see a wave of downward revisions on Wall Street.

Symantec is another strong sell. I rate the stock an F.

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