Stocks to sell is a necessary discussion. Although it may feel good to remain loyal to an organization in the hopes of a substantial turnaround, it’s time to let go of some of the weaker entities.
Fundamentally, the Federal Reserve plays an incredibly significant role in the red ink. With the central bank raising the key benchmark interest rate, borrowing costs increased, thereby hurting risk-on sentiments. For instance, heading into the final day of trading in September, the S&P 500 slipped 24% on a year-to-date basis. Therefore, it’s prudent to consider certain stocks to sell.
In addition, InvestorPlace’s Louis Navellier probably said it best regarding troubled corporate entities. Essentially, their problems become your problems if you acquire their securities. The point about stocks to sell isn’t about “hating” on certain companies. Rather, you want to keep your portfolio drama free heading into a contentious October.
|Abercrombie & Fitch
|Tanger Factory Outlet
Prior to the fiscal first-quarter earnings report for Nike (NYSE:NKE), I mentioned that Wall Street was waiting anxiously for the results. While the general consensus appeared pessimistic due to a range of macroeconomic headwinds impacting NKE, some analysts broadcasted optimism. Because Nike commanded a global branding powerhouse, some data points suggested that it could pull off a positive surprise.
Unfortunately, those folks were wrong. According to the Wall Street Journal, Nike reported that “inventories rose 44% to $9.7 billion in the latest quarter.” In addition, “higher discounts and freight costs squeezed profit margins.” Further, Nike executives mentioned that they had to mark down more goods heading into the holidays.
In the open market following the Sept. 29 disclosure, NKE finished the day down 3.4%. However, in the afterhours session, it slipped nearly 9%. Frankly, it might be time to call the athletic apparel giant one of the top stocks to sell.
If any company could have beat the discretionary consumer sector blues, it was Nike. It failed. It’s time to face reality.
Abercrombie & Fitch (ANF)
One of the most popular apparel companies in the 1990s and 2000s, Abercrombie & Fitch (NYSE:ANF) long tied in to youth culture. Before digitalization took over everything, the cool kids wore Abercrombie & Fitch. Today, the younger folks, including those in Generation Z, don’t really care about name brands. As this demographic grew older, young adult consumer behaviors shifted.
Unfortunately, it shifted in the wrong direction for Abercrombie & Fitch. Over the trailing five years, ANF only gained a bit under 7%. Since the start of this year, shares hemorrhaged 56% of market value. Circumstances will likely worsen for ANF moving forward.
In late August, the company stated “it lost $16.83 million, or 33 cents a share, in its second quarter, compared to a net income of $108.5 million, or $1.69 a share, in the year-ago quarter,” according to MarketWatch.
Now that almighty Nike struggled to resonate with hard-hit consumers, it’s probably time to consider ANF as one of the stocks to sell, as well.
Although companies like Lyft (NASDAQ:LYFT) helped spark the ride-sharing revolution, the underlying industry is presenting us with worrying vulnerabilities. Honestly, the phenomenon must be driving urban survivalists crazy. After all, using an app as a trust mechanism for someone you don’t know presents incredible security issues. Sadly, we’re finding this out now with Lyft.
According to NPR, Lyft faces “17 new lawsuits brought by users of its service from around the country, who claim the company failed to protect passengers and drivers from physical and [prurient] assault.” You can read the details yourself but the main point is that ride sharing presents risks. The lawsuits represent a significant reason to consider LYFT as one of the stocks to sell.
The other stems from rival Uber (NYSE:UBER). While Uber features a far more aggressive financial profile than Lyft – retained earnings loss for Uber is $32 billion versus $8.9 billion for Lyft – the former’s expansionary efforts could effectively monopolize the ride-sharing business. Therefore, LYFT risks relevance loss, making it one of the candidates for stocks to sell.
Tanger Factory Outlet (SKT)
A shopping center-focused real estate investment trust (or REIT), Tanger Factory Outlet (NYSE:SKT) represents an idea for stocks to sell that I’m borrowing from InvestorPlace contributor Ian Bezek. As Bezek mentioned, Tanger’s business model featured extraordinary relevance about two decades ago.
Operators in the shopping center category “would build a major shopping destination in a tourist area or along a major highway in between two big cities. People would go to the outlet center and get bargains that weren’t available at shopping malls or in downtown shopping areas. The thinking was that outlets gave retailers an alternative venue to clear out certain kinds of products, while giving shoppers a fun and novel bargain-hunting experience,” mentioned Bezek.
Unfortunately, Bezek stated that Tanger’s “financial results were poor prior to the pandemic.” With the crisis, circumstances worsened. Thus, the analyst rated the long-term prognosis as “grim.”
For me, the retained earnings line item presents significant concerns. In 2019, this metric saw a loss of $317 million. In the trailing-12-month basis, it’s down $483 million. Thus, SKT could be one of the stocks to sell.
Throughout this year, the real estate market and its broader price trajectory sparked much debate. With the Fed committed to raising the benchmark interest rate, prices fundamentally seem on their way down. It’s just simple math: put barriers to affordability to prospective buyers and demand diminishes. Therefore, I believe it makes perfect sense to consider Redfin (NASDAQ:RDFN) as one of the stocks to sell.
Before discussing this and other stocks to sell in the housing sector, I must disclose my bias. Every time I saw real estate experts talk about housing prices moving even higher, I kept yelling a certain word. It begins with “B” and ends with “T.” In fact, I laid out my case earlier this year for a possible recession on the horizon.
As mentioned earlier, the fundamental problem with real estate brokerage services such as Redfin is the math. As affordability metrics become further constrained for more people, the price of assets must decline to reflect reality. The problem for RDFN is that it may still be financially problematic, making it one of the stocks to sell.
KB Home (KBH)
Among several market ideas to acquire during the heyday of 2021, homebuilding firm KB Home (NYSE:KBH) now arguably represents one of the top stocks to sell. Prior to the heightened interest rate environment, many folks talked about a housing unit shortage. Therefore, the easy solution appeared to be that homebuilders should simply build more homes.
However, I argued that the idea of a housing shortage represented a myth. Long story short, just because the U.S. has more people does not mean it has more qualified homebuyers. For instance, married couples represent a major catalyst for homebuying incentivization. However, the ratio of married couples to housing units has been stable (and adequate) for several years.
Recently, KB Home disclosed its fiscal third-quarter earnings report. It beat on earnings expectations but missed against revenue. Still, I believe the more important stat is days inventory. This figure stood at nearly 382 in fiscal Q3, up 7.5% year-over-year.
KBH is one of the stocks to sell.
At first glance, the iBuyer model for Opendoor (NASDAQ:OPEN) seemed incredibly attractive. Essentially, the company makes instant cash offers on homes through an online process. By doing so, the process of selling real estate is much quicker and more convenient. The implication undergirding OPEN stock was that the model could eventually do away with the cumbersome nature of home-related transactions.
But then, nobody seemed to ask the obvious question: why would anyone want real estate transactions to be quicker and more convenient? You’re not upgrading your smartphone. Rather, you’re buying a home, which is typically the most expensive purchase for the average person. Therefore, you want to make sure that every relevant party to the transaction does their job appropriately. If it takes some time, so what? You don’t want to make a mistake here.
Turns out, another reason to consider OPEN as one of the stocks to sell is the lack of viability. Recently, a report revealed that Opendoor lost money on 42% of transactions in August. That’s startling because the company obviously doesn’t offer top dollar for what is essentially a home-flipping service. So, buyer beware.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.