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 I’m bullish long term, but shorter term, the market is telling us that the trend is uncertain and defensive measures should be taken.
October was not kind to shareholders, but the major indices have fallen to solid areas of chart support, and we are approaching a traditionally strong quarter for stocks. Be patient, trade if you wish, but long-term investors would be wise to wait it out for major commitments. I expect that opportunities to buy will occur sometime in mid-November.
Meanwhile, investors should cull their portfolios for underperforming stocks and those that pose higher-than-average risk. The following stocks have an uncertain future with most showing high rates of insider selling. They should be sold and the proceeds held for better investment opportunities that may occur soon.
Here is our list of stocks to sell in November:
Stock to Sell #1 – Best Buy (BBY)
Consumer electronics retailer Best Buy (NYSE:BBY) is slipping despite its 4,300 stores and broad name recognition. Intense competition from online retailers and thin operating margins have contributed to a sharp downturn in the stock.
Analysts look for a fiscal year (FY) 2013 (ended in January) earnings of $2.70 and a decline of up to 22% in FY 2014.
Insider selling is heavy, and technically, the stock is in a bear market. In late October, BBY fell through a quadruple support line at $17.50. Despite being oversold, the stock is probably headed much lower.
Stock to Sell #2 – Celanese Corp. (CE)
Celanese Corp. (NYSE:CE) is a producer of industrial chemicals, engineered plastics and acetate fibers. Because of its international nature, it could be very sensitive to a global recession. Higher-than-expected raw material costs add to its risk.
The stock is in bear market consolidation following a breakdown from its 200-day moving average and death cross (50-day moving average crossed through 200-day moving average) in June.
Its recent rebound to close to its bear market resistance provides sellers with an excellent opportunity to liquidate. The near-term downside target is $33, but it could be headed even lower. Sell CE at the market.
Stock to Sell #3 – Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (NYSE:CMG) operates more than 1,300 casual Mexican restaurants in the United States and Canada. Same-store sales growth is projected to be 2% in 2013 compared with 6.5% in 2012.
Technically, the stock is in a bear market with immediate resistance at its 20-day moving average (green line) at $265. In October, CMG broke through a quadruple-bottom at $280 on a huge gap with high volume.
It has since bounced to a minor resistance line at $263, but momentum is failing and it is unlikely to successfully challenge the resistance at $280. Sell CMG at the market.
Stock to Sell #4 – Garmin Ltd. (GRMN)
Garmin Ltd. (NASDAQ:GRMN) provides navigation, communication and information devices for aviation, marine, automotive and recreation markets. Increased competition from free mobile GPS from Google (NASDAQ:GOOG) and others and a slow-growing economy have put pressure on Garmin’s operating EPS, which is expected to decline in 2013.
Insider selling has increased, and technically, the stock is consolidating under a double-top at $43. MACD is oversold, but new sellers have appeared, and therefore, the chance of a break below the support line at $35-$36 has increased.
A breakdown would most likely trigger a sell-off with an objective of $27 to $28. Sell on a close under $36.
Stock to Sell #5 – Intersil Corp. (ISIL)
Intersil Corp. (NASDAQ:ISIL) designs, manufactures and markets analog and mixed-signal integrated circuits for the consumer electronics market. Twenty-one percent of the company’s revenues are derived from PCs, and shifting markets and market share losses cloud future earnings. ISIL is attempting to transition away from PCs, but this is likely to lead to losses.
Technically, the stock is in a bear market. Its decline accelerated in October, when it broke down through its bearish support line. A bounce from an oversold condition gives shareholders an opportunity to sell this underperformer.
Stock to Sell #6 – United Technologies Corp. (UTX)
United Technologies Corp. (NYSE:UTX) is a major aerospace/industrial conglomerate that includes Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners. Earnings for 2012 are estimated at $5.43, down from $5.49 in 2011.
Business may be improving, but it has yet to hit UTX’s bottom line, and risk of failure due to slow growth in Europe and China is high.
Insiders have been sellers in the past three- and 12-month periods. Sell UTX at the market since it is unlikely that the stock will achieve significant gains within the next 12 months.