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Stock Strategist

Two Sectors that Deserve the Cold Shoulder

Don't waste your time with tech and energy stocks.

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In a previous article I highlighted the best-performing sectors of the past five years and pointed investors to a few undervalued sectors. I also promised a column in which I'd discuss the worst-performing sectors of the past five years. Here it is, and not only will I tell you where you shouldn't have invested, I'll also point out a few sectors that you might want to ignore right now.

Of the 12 sectors that Morningstar actively tracks, none has performed worse over the past five years than hardware, which has dropped 17% per year over the past five years. This is a sector that is--and was--filled with some of the highest-flyers of the Internet bubble years, companies like  JDS Uniphase (JDSU),  Nortel Networks (NT), and  Lucent Technologies (LU). Each of these stocks has lost at least 35% of its value in each of the past five years. For example, JDS Uniphase traded for more than $120 five years ago and now trades for less than $2.

Jonathan Schrader does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.