Scorched-Earth Policy Could Fry Portfolios: Wal-Mart Stores, Inc. (WMT), J.C. Penney Company, Inc. (JCP)

J.C. Penney Company, Inc. (NYSE:JCP)’s quarterly results were horrific, with a mind-boggling 32% decline in same-store sales in the holiday quarter. Yesterday, Standard & Poor’s cut its debt rating on top of the obviously ugly news in its financial release.

Sears may have reported a “less bad” quarter this week than in the past, narrowing its quarterly loss, but sales still dropped by 2% and same-store sales fell 1.6%. It’s also topped a list that’s no reason to celebrate: It’s become the most shorted company on the Nasdaq.

Best Buy Co., Inc. (NYSE:BBY) bucked the trend by reporting a better-than-expected quarter, but don’t be fooled. Revenue and same-store sales were still weak, rising anemically by 0.2% and 0.9%, respectively.

Rather than falling for value traps, investors should hold gold-standard companies throughout today’s uncertain times. The Motley Fool’s list ofThe 25 Best Companies in America gives investors great ideas for protecting their portfolios from dangerous, weak stock holdings. The Fool’s list points to companies that are built to survive and thrive because their focus is not solely shareholder value but also the value they create for customers, employees, and the world.

There are some surprise stock ideas to consider here, too. The company that came in at No. 1 is one many of us may not have even heard of: Cummins Inc. (NYSE:CMI). It manufactures engines, but part of its magic is its emphasis on cutting greenhouse gas emissions and launching world-friendly initiatives like the Technical Education for Communities Program, which trains young people in economically challenged communities the skills they need to work at companies like Cummins.

What really powers prosperity
Focusing on great companies is a great investment policy during times of economic hardship and prosperity alike. The companies that take more into account than simply shareholder value boost our economy instead of detracting from it. So let’s hunker down and protect our portfolios.

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The article Scorched-Earth Policy Could Fry Portfolios originally appeared on Fool.com and is written by Alyce Lomax.

Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends Cummins. The Motley Fool owns shares of Cummins.

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