With Europe in trouble and China’s rate of growth slowing, the United States may eventually be the fortress of the world’s economy. That is why long term I’m bullish, but shorter term the market is telling us that the trend is down and that defensive measures should be taken.
Some hope for the bulls was provided by a statement from Fed Chairman Ben Bernanke that “there is room for more action on the part of the Fed to shore up growth.” But the long-awaited Jackson Hole meeting in late August produced only promises that the Fed could provide help if needed. Meanwhile, the European Economic Community (EEC) is on the brink of fracture as the squabble continues among the higher-producing countries in the north and the more leisurely producers of the south. The European Central Bank (ECB) appears incapable of solving the problem.
In such an uncertain environment, it is best to stick with high-quality stocks with proven performance and high dividend yields and sell underperformers. High-tech non-performers could be subject to a significant decline, and so this month I have focused on several that appear to qualify as dangerously overpriced. Here is our list of stocks to sell in September:
Stock to Sell #1 – Cognex Corp. (CGNX)
Cognex Corp. (NASDAQ:CGNX), a producer of machine vision products that capture and analyze visual information to automate tasks primarily in manufacturing processes, is estimating that earnings for 2012 will fall to $1.55 from $1.63 last year. Analysts have recently reduced their targets and earnings estimates due to the continuing global economic slowdown.
Technically the stock bounced from about $30 in July to over $36 where it turned back from its 200-day moving average. Sell CGNX if you own it and sell it short if you are a trader. The downside trading target is $30.
Short-selling is a high-risk, speculative technique, so a stop-loss order should be used. And check with your broker for any special margin requirements.
Stock to Sell #2 – Expeditors International of Washington (EXPD)
Expeditors International of Washington (NASDAQ:EXPD) provides customers with an international network for the movement of goods. It includes the positioning and forwarding of air and ocean freight.
On Aug. 6, Goldman Sachs (NYSE:GS) lowered its price target and placed a “sell” recommendation on the stock. The stock is in a clearly defined bear market channel. There has been heavy selling recently, and the MACD indicator went to a “sell” in late August. Sell EXPD with a target of $30.
Stock to Sell #3 – Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) is recognized as one of the world’s leading investment banking and securities firms. But legal, economic and market conditions have resulted in three years of lower earnings, and investigations by the government have led to more declines and heavy insider selling.
The stock rallied to its 200-day moving average at $104 in August from support at $90. But it appears to have stalled there and the MACD recently flashed a sell signal. Sell GS at the market with a downside target of $90.
Stock to Sell #4 – Intel Corp. (INTC)
Intel Corp. (NASDAQ:INTC) is the world’s largest manufacturer of microprocessors for PCs. Earnings have been flat with consensus estimates for 2012 at $2.38 and $2.55 in 2013. Risks are high due to the global economic slowdown.
The stock is trading in a bearish channel, and it executed a “death cross” (long-term sell signal) in August, as well as a sell signal from the MACD. Heavy selling appeared at the end of the month.
Long-term holders should sell INTC. If the low at just over $24 is broken, look for a quick sell-off to $20.
Stock to Sell #5 – LSI Corp. (LSI)
LSI Corp. (NYSE:LSI), a manufacturer of storage and networking semiconductors, is expected to earn 58 cents this year, up from 15 cents in 2011. But there is a high risk of the company not making its target.
The recent rally from $5.59 in July appears to have stalled at a resistance line at $7.90. Buyers decreased in August, and the MACD turned to a “sell” mid-month. Sell LSI at the market with a downside target of $6.
Stock to Sell #6 – Merck & Co. (MRK)
Merck & Co. (NYSE:MRK) is one of the world’s largest drug makers. Analysts note that the company has a number of promising drugs in its “pipeline” that could have an impact on earnings next year, but approvals have been slow. BOA Merrill Lynch recently downgraded its rating to “neutral.”
A break below $43 could result in a pullback to the low $30s. Historically MRK has been a slow-growing stock, thus it should be sold and the money repositioned into a better-performing investment.