U.S. equities continue to flirt (unsuccessfully) with the 20,000 level on the Dow Jones Industrial Average. We’re in the heart of the “Santa Claus Rally” seasonal tailwinds and post-election sentiment remains red-hot.
But as the calendar turns to the New Year, seasonality becomes a drag: Stocks have fallen in each of the last three Januaries. Moreover, since the recession ended, there have only been three Januaries in which stocks have actually posted a gain.
I blame the post-holiday blues. But whatever the reason, stocks tend to stumble at the start of the year.
Worse: Heading into 2017, the situation looks even more difficult. Stocks are technically overextended. Doubts remain over the economic policies of President-elect Donald Trump. And earnings and economic growth expectations seem elevated as the Federal Reserve ramps up its rate hike schedule.
This could be an ugly January. One of the best ways to prepare is to pare potential underperformers. Here are five stocks to sell heading into January:
Stocks to Sell in January: Ford (F)
Ford Motor Company (NYSE:F) is something of a worry point right now, what with the company facing an investigation over brakes on older Fusion and Mercury Milan models.
However, more worrisome at the moment is that shares have fallen back below their 200-day moving average, reversing much of the 20% gain enjoyed off of their early November low. Investors are selling as higher borrowing costs — after bond prices plunged in the wake of Trump’s surprise victory — weighed on November auto sales in a big way.
The auto market looks oversaturated now, with dealer inventories swollen, loan terms already blown out to 84 months or more, and lease take-up (as a percentage of total sales) historically high.
It doesn’t help that Ford shares have fallen in each of the past three Januaries.
Ford’s next quarterly results are expected Jan. 26 before the bell. Analysts are looking for earnings of 35 cents per share on revenues of $35.4 billion.
Stocks to Sell in January: Freeport-McMoRan (FCX)
Freeport-McMoRan Inc (NYSE:FCX) shares surged some 80% from their October lows thanks to a blowout in basic materials and industrial stocks following Trump’s election win, spurred by expectations of an aggressive infrastructure building program.
But in recent weeks, shares have been sliding lower as the realities of the U.S. fiscal deficit, growing debt and budget hawks in Congress dampen that enthusiasm somewhat.
FCX, like Ford, is a seasonal dud in January, falling in each of the past three years.
Freeport is expected to report its next quarterly results on Jan. 24 before the bell. Analysts are looking for earnings of 30 cents per share on revenues of $4.3 billion.
Stocks to Sell in January: Twitter (TWTR)
Twitter Inc (NYSE:TWTR), the troubled internet icon, is testing critical support at its July/October lows and looks set to a return to its May/June trading range.
So much for buyout hopes.
Twitter stock is down roughly 40% from its early October high as M&A hype — that included the likes of Walt Disney Co (NYSE:DIS), Alphabet Inc (NASDAQ:GOOGL) and Salesforce.com, Inc. (NYSE:CRM) — has faded amid an ongoing struggle to broaden the service’s appeal.
For what it’s worth, Twitter was a particularly nasty loser amid last January’s swoon, off 26%. Expect any broad-market dip this upcoming January to be similarly exaggerated in TWTR shares.
Twitter’s next report is expected to come Feb. 8 before the bell. Analysts are looking for earnings of 12 cents per share on revenues of $741.4 million.
Stocks to Sell in January: Best Buy (BBY)
With the 2016 holiday shopping season wrapped up, Best Buy Co Inc (NYSE:BBY) looks vulnerable to a downside break of its six-month uptrend as it moves in on critical support at its 50-day moving average.
The electronics giant popped above three-year resistance near $40 last month amid pre-holiday optimism, but a lack of major new electronics products, a disappointing iPhone 7 release and price competition with the likes of Amazon.com, Inc. (NASDAQ:AMZN) should see the gains quickly reversed.
BBY shares have tended to suffer nasty declines in January, as the post-holiday blues set in. While it lost 6% earlier this year, Best Buy dipped more than 40% in the first month of 2015.
Wall Street expects Amazon’s next earnings report to come Feb. 23 after the bell. Analysts are looking for earnings of $1.67 per share on revenues of $13.6 billion.
Stocks to Sell in January: Sears (SHLD)
Troubled retailer Sears Holding Corp (NASDAQ:SHLD) is falling to fresh lows as reports of a possible bankruptcy swirl around the company. Reports are that some vendors are tightening terms with the liquidity-challenged retailer. Cash and lack of profitability have been an issue for years — and that’s no rumor.
Shares have absolutely collapsed, with SHLD down more than 80% from their mid-2015 highs and nearly 40% over the past few weeks alone. It’s also a huge January loser, with shares off in each of the past six Januaries.
Sears’ next report should come before the bell on Feb. 23. Analysts are looking for yet another loss — this time, of $2.91 per share — on revenues of just over $6 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
