After a very volatile year, finding stocks to sell in 2011 sounds like a pretty easy task. But don’t kid yourself — some good companies have been unfairly oversold, and there are a lot of bargains out there. And now that the market has seen a sharp selloff this summer, there is a chance that many picks already have seen the bad news “priced in.”
So how do you decide between stocks to sell in 2011 and stocks to hold in the hopes of a rebound? Simple: Think of yourself as an investor who doesn’t own a thing, then look at your current holdings as if for the very first time.
Would you buy those stocks based on the current news, at the current price? If so, then the picks are worth holding onto — no matter how bad your losses.
But if you look impartially at your portfolio and find yourself turned off by the idea of ownership, it’s time to sell these stocks in 2011 before it’s too late.
Here are three stocks to sell in 2011 before the turn of the new year:
Stock to Sell #1 — Chipotle
I know, you like their burritos. I do too. But Chipotle (NYSE:CMG) shares are overcooked, and this company is a stock to sell in 2011. Chipotle is in the vein of Krispy Kreme (NYSE:KKD) or Starbucks (NASDAQ:SBUX), both of which hit walls after overexpansion.
Right now, Chipotle has a forward P/E that is a nosebleed 35.5. On the margins front, almost every ingredient the company uses is suffering rampant inflation — for instance, nationwide beef prices are up 8% to 9% in 2011. To boot, while companies like McDonald’s (NYSE:MCD) are well-oiled food manufacturing machines, Chipotle hasn’t even heard of portion control to protect margins. On the growth front, there are no menu innovations or promotions to spur growth, just opening more stores. Also throw in the fact that a 900-calorie burrito is hardly health food and the fact that an $8 lunch is hardly a bargain given value menus at competitors. The stock is off about 9% from its Sept. 20 peak near $350 per share, and there’s a good chance it only has farther to fall.
See also: 10 Best Stocks to Own Now