While investors are hoping for a quick end to the current bear market, recent data signals it’s not likely to be over soon. The September core consumer price index, which excludes food and energy prices, hit a 40-year high. This, combined with the fact that the labor market remains strong, nearly guarantees the Federal Reserve will continue hiking interest rates aggressively.
Most on Wall Street seem to agree that we’re heading for a recession, although there’s not a consensus on how nasty of one it will be. As investors, now is probably a good time to consider how you can reduce risk, which includes culling companies with poor fundamentals and big headwinds from your portfolio.
With that in mind, here are three stocks to sell in a bear market.
|Annaly Capital Management
AMC Entertainment (NYSE:AMC) is one of the original meme stocks. Shares of the struggling movie theater chain vaulted to once unimaginable heights thanks to a retail investor army who dubbed themselves the AMC “apes.”
Yet, as interesting as this was to watch, when you get right down to it, AMC is really just a leader in a slowly dying industry. Movie theater ticket sales have been declining for the better part of two decades. There’s a reason AMC stock was trading around $2 per share prior to the meme-stock mania.
In the first six months of 2019, AMC reported $2.7 billion in sales from an attendance of nearly 177 million moviegoers. During that period, AMC lost nearly $81 million. In the first half of 2022, AMC reported $1.95 billion in revenue from around 69 million moviegoers. So, the company is far from where it was pre-pandemic in terms of sales and attendance. It also posted a net loss of $459 million in the first half of 2022.
Bottom line: There was no good reason to invest in AMC stock then and there’s no good reason to invest in it now.
Annaly Capital Management (NLY)
Mortgage-backed real estate investment trust Annaly Capital Management (NYSE:NLY) is showing serious signs of distress as mortgage rates continue to rise amid Fed tightening that is going to continue.
Annaly Capital undertook a reverse stock split on Sept. 23, consolidating every four shares of its stock into one. Reverse stock splits are typically done with the intention of artificially inflating a stock’s value, as the underlying market capitalization of a firm doesn’t change. The market generally sees such a move as a bad sign, and shares often move lower in the wake of a reverse split.
Since the split, NLY stock has lost around 20% of its value, and it’s down nearly 40% year to date. With the latest inflation numbers all but assuring a 75-basis-point rate hike next month, followed by another increase in December, things aren’t going to get easier for Annaly Capital Management in the near future.
Some investors may be enticed by the stock’s high dividend yield, which now stands at nearly 21% post-split. Don’t fall for it. NLY is an obvious stock to sell in a bear market.
Tilray Brands (TLRY)
Last up on today’s list of stocks to sell in a bear market is medical and recreational cannabis purveyor Tilray Brands (NASDAQ:TLRY). On Oct. 6, shares soared 31% on news President Joe Biden was pardoning more than 6,500 people convicted of marijuana possession.
Yet, the next day, TLRY stock gave back much of those gains after the company reported weaker-than-anticipated revenue and earnings. Revenue declined 9% year over year, falling to $153.2 million, while net losses increased from $34.6 million to $65.8 million in the period. The company reported a loss of 13 cents per share, compared with 8 cents a year ago and worse than the 7-cent loss Wall Street was expecting.
Fundamentally, the company is headed in the wrong direction. The firm likes to tout its leading position in the Canadian cannabis market. But the truth is its current operational base is not enough. And there’s a long way to go in the U.S. between a federal pardon and legalization.
On the date of publication, Alex Sirois 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.