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With the stock market continuing to head lower, you need all the help you can get to protect your investments from catastrophic losses. That's why we recently decided to turn our attention to dangerous stocks that could burn your portfolio.
Unfortunately, there's no shortage of those stocks around right now. But to find out which ones pose the biggest threat to your wealth, we looked to our Motley Fool CAPS community for guidance, and we asked you to vote. Let's look at which companies you thought were most likely to set off smoke alarms in this bear market.
Death by credit crisis
Honorable mention goes to a pair of financial stocks, Wachovia (NYSE: WB ) and Ambac Financial (NYSE: ABK ) . Each has become a victim of the credit crunch -- Ambac's bond insurance business has taken a hit from the evaporating demand for collateralized debt, and Wachovia faces a double threat of mortgage-related losses and potential liability for iffy practices related to auction rate securities.
Yet even though many believe it's only a matter of time before these businesses destroy shareholder value, others think the crisis has been overblown and see potential for a strong recovery. Who's right? Time will tell.
Third place goes to SulphCo, with its so-far unrealized business model of removing sulphur from lower-priced heavy-grade crude oil. As they consider production delays, declining output, falling oil prices, and aborted deals with larger producers, CAPS members are predicting continuing challenges for shareholders.
Our second-place choice was electronics seller Circuit City (NYSE: CC ) . CAPS members agreed that the company's second-fiddle status to Best Buy (NYSE: BBY ) meant trouble for the beleaguered retailer, and the failure of a potential takeover by Blockbuster (NYSE: BBI ) killed many shareholders' hopes.
But as bad as Circuit City's losses have been, you can still measure them in millions. For truly huge losses, you have to go to the heart of the manufacturing sector.
And now, our "winner"
The top pick for the stock most likely to burn your portfolio is car giant General Motors (NYSE: GM ) . Along with rival Ford (NYSE: F ) , the U.S. auto industry is a favorite target for CAPS members looking for underperformers. Although there's a strong contrarian contingent that still holds out hope for Ford's prospects, the consensus on GM is much more negative. Labor challenges, slow responses to changing fuel prices, and increasing competition from Japanese automakers employing U.S. workers could well be the death knell for the debt-laden company.
Want to learn more about which stocks to buy -- or avoid? Try out Motley Fool CAPS for yourself. It won't cost you a dime, but the info it gives you could save you thousands.