Green to Red: ISPs and Software Are Industries to Avoid

Any shift up or down in PowerRatings is significant. But when you get huge shifts -- shifts from the "consider buying" comfort zone of the 8, 9, and 10-rated PowerRatings (for Industries) rated industries down to the "avoid buying" panic room of the 3, 2, and 1-rated PowerRatings (for Industries) rated industries -- then you often have a development that demands attention.

Two industries have managed to work themselves into this unfortunate situation as of Friday, November 9. These industries -- Internet Service Providers and Multimedia and Graphics Software -- saw their PowerRatings (for Industries) ratings drop from a healthy 8 to bottom of the barrel PowerRatings (for Industries) ratings of 1. If there are industries to avoid, then these formerly top-rated industries may be them.

The Internet Service Providers industry consists of Cogent Communications Group, Priceline.com, and Earthlink, Inc. Cogent Communications (NasdaqGM: - ) has a PowerRatings (for Investors) rating of 3. Priceline.com (NasdaqGS: - ) has a PowerRatings (for Investors) rating of 5. Earthlink, Inc. (NasdaqGS: - ) has a PowerRatings (for Investors) rating of 6.

The Multimedia and Graphics Software industry consists of six companies. Four of these companies have "average" PowerRatings (for Investors) ratings between 5 and 7. These companies include THQ, Inc (NYSE: - ) with a PowerRatings (for Investors) rating of 7, Electronic Arts (NasdaqGS: - ) with a PowerRatings (for Investors) rating of 6, Activision (NasdaqGS: - ) with a PowerRatings (for Investors) rating of 6, and Blackboard (NasdaqGS: - ) with a PowerRatings (for Investors) rating of 5.

Two stocks in the Multimedia and Graphics Software industry, however, are truly "in the red". These stocks are Take-Two Interactive (NasdaqGS: - ) with a PowerRatings (for Investors) rating of 3, and Divx, Inc. (NasdaqGM: - ) also with a PowerRatings (for Investors) rating of 3.

First and foremost, industries that see their PowerRatings (for Industries) ratings make such dramatic shifts from well in-the-green (i.e., 8) to bottom of the barrel (i.e., 1) are industries from which investors should run, not walk. Second, while the "prime directive" concerning such industries and their stocks is to avoid them, more aggressive investors can even consider taking bets against these industries and their stocks

If this is your choice, then look at the stocks with the lowest PowerRatings (for Investors) -- stocks with PowerRatings (for Investors) ratings that are in the red -- to find the stocks that are most likely to underperform. From among the industries noted here, there are three potential candidates for investors looking to exploit a potential downturn: Cogent Communications, Inc, (CCOI) from the Internet Service Providers industry, which has a PowerRatings (for Investors) rating of 3 and, from the Multimedia and Graphics Software industry, both Divx, Inc (DIVX) and Take Two Interactive (TTWO), with PowerRatings (for Investors) ratings of 3.

Green to Red: ISPs and Software Are Industries to Avoid Recap:

Internet Service Providers. PowerRatings (for Industries) rating: 1

Cogent Communications (CCOI). PowerRatings (for Investors) rating: 3

Multimedia and Graphics Software. PowerRatings (for Industries) rating: 1

Take Two Interactive (TTWO). PowerRatings (for Investors) rating: 3

Divx, Inc. (DIVX). PowerRatings (for Investors) rating: 3

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