Currently, the prospect of bombing Syria has heightened economic and political pressures to very high levels. The G-20 meeting turned into a dud, expectations of the beginning of a Fed cut in its bond-buying program are fading due to a poor jobs report, the anniversary of 9/11 has everyone nervous, and the government is again facing a possible shutdown.
But despite all these negatives, the stock market has acted remarkably well in the face of potentially horrible news. When a market moves ahead against the news, and especially when it hits new highs, the bull trend must be followed. The market has spoken and the trend is up. Don’t fight the tape.
However, many investors still hold low-quality stocks that are unlikely, under any circumstance, to stage a meaningful recovery. The stocks on this month’s list probably will not provide the protection needed in uncertain times and will not be able to keep up the pace in better times.
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Here is our list of stocks to sell in September:
Stock to Sell #1 – Advance Auto Parts (AAP)
Advance Auto Parts (AAP) is a specialty retailer of aftermarket auto parts. The company reported Q2 earnings that beat estimates on Aug. 13, causing the stock to pop to $84.93. However, AAP settled into a downtrend shortly after.
It then continued lower, breaking its 200-day moving average and establishing a downtrend. The selling has been accompanied by heavy volume.
I recommend selling AAP based on its poor price action. Short-sale orders should be accompanied by a stop-loss order at $85.
Stock to Sell #2 – eBay (EBAY)
eBay (EBAY) is one of the most popular e-commerce sites, but acquisitions and expansion have limited growth for several years. Its entrance into developing markets has been unsteady, and regulatory and legal matters could have a negative impact on future earnings.
Although consensus earnings are expected to grow to $3.18 in 2014, up from an estimated $2.71 in 2013, that is far from certain. And at almost 20 times this year’s earnings, the stock is no bargain.
Technically EBAY is forming a bearish rounding top, and the 50-day moving average has crossed the 200-day moving average — a bearish signal called a death cross. Sell at the market.
Stock to Sell #3 – Goldcorp (GG)
Goldcorp (GG) engages in the acquisition, development, exploration and operation of precious metal properties in Canada, the United States, Mexico, and Central and South America
Revenues were down for the first six months of the year, and earnings for the last four years have been inconsistent. The consensus estimate for 2014 is $1.40 versus an estimated $0.95 in 2013, but the lowest estimate by several analysts is for $0.65 per share this year. Thus, the estimated spread is wide, and the P/E ratio high.
The recent series of crises in the Middle East may have attracted buyers, but the stock ran out of steam at its 200-day moving average, where it formed a bearish double-top. MACD is on a sell signal. Sell GG at the market.
Stock to Sell #4 – McDermott International (MDR)
McDermott International (MDR) is an engineering, construction and procurement company that focuses on designing complex offshore oil and gas projects. It has been on our sell list since February 2012. Its execution has been weak and earnings have regularly declined.
On Aug. 5, MDR again reported weak earnings due to decreased activities in the Middle East and Asia-Pacific region. Losses totaled $0.63 cents a share versus an estimated profit of $0.03. Now a major lawsuit has been filed by some stockholders who allege that management withheld certain unfavorable financial information.
The stock has been in a bear channel since February 2013. The recent rally to close to $8 failed at the bearish resistance (red-dash) line and 50-day moving average (blue line). Sell MDR at the market.
Stock to Sell #5 – Netgear (NTGR)
Netgear (NTGR) provides networking products to consumers, businesses and service providers. Slow growth expectations continue a pattern that began in 2011 with earnings of $2.41. The company earned $2.57 in 2012 and is expected to earn $2.30 this year. Estimates for 2014 are for $2.65, but credibility is low and the stock is in a bear market.
The recent high-volume break under a support line at around $29 that had held since July is confirmation that the downtrend is not over. Sell NTGR at the market.
Stock to Sell #6 – Newmont Mining (NEM)
Newmont Mining (NEM) is one of the largest gold and copper producers in the world. In my Stocks to Sell in April report, I said, “A recent recovery rally from its March low of $38.50 appears to be stalling at its 50-day moving average, now at $42.10. Buying volume is declining, and so the stock doesn’t appear to have enough momentum to complete a reversal up.” And in June, I said, “As expected, the recovery failed and the stock plunged to $30.30.”
Now analysts are expecting lower sales estimates for this year accompanied by higher production costs, which they calculate will bring in earnings of $1.94 in 2013, down from $3.71 in 2012.
The stock is in an extended bear market and has only rallied as a result of the world’s unstable political condition. The recent rally failed at its intermediate resistance line at $34, which was accompanied by a sell signal from MACD. Use the recent bounce to sell NEM at the market.