Investors have faced tough times for years, and things only seem to be getting worse. As Europe stubbornly fails to resolve its problems and Washington gridlock threatens the U.S. economy as well, 2012 could be a dangerous time for the stock market.

In times like these, the key is to protect your capital. That doesn't mean dumping stocks entirely, but it does mean making sure you have the best-quality stocks you can find -- and weeding out ones that aren't making the grade. You simply can't afford to take on big risk when the rewards simply aren't there.

Today, I'm looking at five stocks from the Dow Jones Industrials (INDEX: ^DJI) for which the consensus of analysts expects the worst returns next year. Those five Dow stocks are as follows:

Stock

Current Price

Target Price

Expected Gain

Expected Sales Growth

Expected EPS Growth

Verizon (NYS: VZ) 38.42 39.14 2% 4.1% 15.9%
IBM (NYS: IBM) 187.48 196.00 5% 3% 10.1%
McDonald's (NYS: MCD) 98.14 103.48 5% 5.6% 9.6%
Wal-Mart (NYS: WMT) 57.95 61.70 6% 5.2% 9.4%
Home Depot (NYS: HD) 39.42 42.24 7% 3.4% 14.2%

Source: Yahoo! Finance. Prices as of Dec. 15 close.

Several of these stocks also made our list of Dow stocks that made investors happy in 2011, so no one's saying that these companies don't have strong businesses. But with so little upside potential, it's entirely possible that the shares have already run their course -- and if an overall downturn in stocks does happen, then these past winners could be the first on the chopping block.

Even though you shouldn't just sell first and ask questions later based simply on pessimistic target prices, it gives you a good way to focus your research. So let's take a closer look at these five stocks to find out what else we can learn.

Are analysts too pessimistic?
That's the way to look at those stocks from the bearish perspective, which the consensus of analysts seems to favor. While analysts make plenty of mistakes, they're more often too rosy in their outlooks than too dour.

Still, with these stocks appearing fully priced, the slightest bad news could send them reeling. With such high expectations, you might want a stock that gives you a bigger margin of safety for next year.

To find exactly those kinds of stocks, I have a suggestion: Check out this free special report from the Motley Fool, which details five stocks that the Fool owns for its own portfolio. We think you should own them, too, but you can't buy them if you don't know what they are. So check out these stock ideas for yourself.

At the time this article was published Fool contributor Dan Caplinger is always ready for a good struggle. You can follow him on Twitter. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Wal-Mart and IBM. Motley Fool newsletter services have recommended buying shares of Home Depot, McDonald's, and Wal-Mart and creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy stands up for you.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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marine1942

Love MCD. Own some now and shall be buying more ASAP !!!

December 19 2011 at 11:09 AM Report abuse rate up rate down Reply