Members of my Inner Circle service often ask me for stock advice about picks they are thinking of buying that we don’t cover in our newsletters. A large number of these stocks fall into a grey area. Sometimes my stock advice is that they are “okay to hold,” but we wouldn’t advise buying them. When Inner Circle members ask about one of these companies, that’s what my stock advice would be: it’s “okay to hold.”

Others don’t inspire our confidence at all, and our advice would be to avoid them or sell them if you own them. Here are three recent examples of our Inner Circle stock advice:

YELLOW PAGES INCOME FUND (Toronto symbol YLO.UN) is the largest telephone-directory publisher in Canada, where it owns the Yellow Pages and Pages Jaunes trademarks. Aside from phone directories, it prints free, advertising-based publications, including Auto Trader, Buy & Sell and Renters News, through 98%-owned Trader Corp. It also operates web sites devoted to classified advertising.

Yellow Pages’ assets mainly consist of intangibles (77% of market cap) and goodwill (246% of market cap). These only have full value if the fund can maintain its market share, public recognition and loyalty as the leading brand. This leaves its earnings vulnerable to possible future writedowns of these assets. As well, Yellow Pages’ long-term debt is high.

Yellow Pages gives its products away and relies on a steady stream of advertising renewals from professionals, such as lawyers and dentists, and from small businesses, like movers. More people are moving to the Internet to search out these types of services, and this hurts Yellow Pages’ publications.

The company is working on getting more revenue from online ads, but it’s far from certain whether this will be enough to offset the drop at its publications. Moreover, competition for Internet advertising dollars is strong, and includes large newspapers and magazines, not to mention rival classified sellers and directories.

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Our stock advice: We think there are better income trusts available for income-seeking investors than Yellow Pages Income Fund. Sell.

NORBORD INC (Toronto symbol NBD) is an international maker of wood-based panels. Norbord employs about 2,500 people at 15 plants in the United States, Europe and Canada.

Norbord’s main product is Oriented Strand Board (OSB), an engineered wood panel designed for home construction and industrial use. The company also makes fibreboard, particleboard and plywood. As such, Norbord’s business is highly cyclical, and heavily tied to single-family housing starts. That adds to its risk, especially with home building in a slump in the U.S. As well, nine large OSB production lines opened worldwide between 2005 and 2007. This is pushing down prices.

Norbord has taken measures to shore up its balance sheet, including a rights offering and the suspension of its dividend. However, its $521-million debt is a high 94% of its market cap. Meanwhile, the outlook for OSB prices is poor.

Our stock advice: We don’t have a lot of confidence in the long-term outlook for Norbord. It’s a sell.

UNISYS CORP. (New York symbol UIS) sells information-technology services to businesses and government agencies. The United States government accounts for 17% of its revenue.

Unisys spends just 2.5% of its revenue on research. The company now plans to develop new hardware with the help of partners in order to lower its research costs.

Computer outsourcing and consulting is a highly competitive industry. Unisys faces ongoing competition from much larger companies, such as IBM and Hewlett-Packard, who spend much more on research.

Unisys has lost money since 2005. The company’s new management plans to return it to profitability with an aggressive cost-cutting plan. Unisys hopes this will lower its costs by $225 million a year.

Our stock advice: Unisys doesn’t inspire our confidence. It’s a sell.