In tough times, hope springs eternal. But if your stocks have absolutely nothing going for them, you really owe it to yourself to pull the plug and move on -- no matter how painful it may be.

Before 2008, figuring out which stocks to avoid didn't take rocket science. As most companies' stock prices rose, you could say with confidence that any company whose shares didn't rise in value clearly had some problem. Even if you couldn't identify exactly what the problem was, the success of thousands of other stocks told you that something wasn't quite right.

Now, though, nearly all stocks are falling. Moreover, some companies with long histories and strong future prospects have fallen precipitously. So to figure out which stocks are truly dreadful, you have to look further than just the share price.

A reason to invest
Typically, investors look for one or more attractive traits about a company that make it worth further research. A few of the most important include:

  • Growth prospects. A fast-growing company has the potential to see its shares explode upward in no time. Although an investor has to discount the value of future earnings compared to the income a company is generating now, high future growth rates more than make up for that discount. So the sky's the limit for some big growers.
  • Value propositions. In contrast, plenty of stocks have reached maturity and have already tapped pretty much all of their prospective markets. Yet while parabolic growth isn't in the cards for these mature companies, their stocks might still be good buys -- if the price is right.
  • Dividend producers. Some invest not in the hope of making millions but rather simply to supplement their income with much-needed extra cash. For them, what a company chooses to pay out in the form of dividends is by far the most important consideration. As long as that quarterly check keeps coming in, they can put up with other challenges.
  • Size. Over time, smaller companies have produced stronger returns than their larger counterparts. But many investors prefer to invest in large-cap stocks because they seem safer and less speculative than tiny upstarts just gaining a toehold in their respective industries.

As you'd imagine, most stocks fall into at least one of these categories. A company like Amazon.com (NASDAQ:AMZN) may be relatively expensive, with a P/E ratio above 40, making it unattractive to a value investor. But with projected earnings growth of 20%, Amazon might be appealing to growth-focused investors. Similarly, Apple (NASDAQ:AAPL) has produced strong profits and growth for investors over the years, but because it hasn't paid a dividend since 1995, many income investors simply won't consider it for their portfolios.

In other words, just because you might not want to buy a stock doesn't mean everyone thinks it's bad. But if a stock doesn't fit into any of these categories, you have to wonder: Why would anyone invest in it?

Failing all the tests
To see if there actually were any stocks that failed in all those categories, I looked for companies with high or undefined P/E ratios, bad metrics on profitability, no prospects for strong future growth, and no dividends. At first, I wasn't sure I'd find any, but sure enough, some well-known companies popped up on the list:

Stock

Trailing P/E

Net Margin

5-Year Earnings Growth Estimate

Dividend Yield

Ford (NYSE:F)

NM

(10.5%)

9.8%

0%

Progressive (NYSE:PGR)

NM

(0.6%)

6.3%

0%

Sun Microsystems (NASDAQ:JAVA)

NM

(13.8%)

9.5%

0%

Tenet Healthcare (NYSE:THC)

NM

(0.2%)

6.0%

0%

General Motors (NYSE:GM)

NM

(13.2%)

7.3%

0%

Source: Yahoo! Finance. NM = not meaningful due to negative earnings. Dividend yield reflects the forward 12 months.

The unfortunate thing is that all of these companies used to be attractive in at least one way. Ford and GM were powerful dividend payers for years. Sun had strong growth prospects that always seemed to fizzle out. Yet over time, they've simply lost their appeal.

The best investment
Ideally, you'd like to find a stock that meets every criterion for greatness. A company with strong growth prospects at a reasonable price that pays income -- well, that's a dream stock for most investors.

Failing that, though, make sure you get as much as you can. And if a stock doesn't give you any reason to hold on, then take the hint and find a better one.

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Fool contributor Dan Caplinger tries to avoid dead-end stocks. He doesn't own shares of the companies mentioned in this article. Amazon.com and Apple are Motley Fool Stock Advisor selections. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy always has something going for you.