The month of March doesn’t just produce a decent-if-not-spectacular average monthly gain of 0.6%, but it does so while spreading the wealth. Historically, the third month of the year is a seasonally strong one for equities, as a broad swatch of stocks chip in with gains.
Against that backdrop, you’d think it’d be difficult to find stocks to sell. But they do exist.
The S&P 500 spent the month in record territory above the 2,000 level and the Nasdaq Composite hit a 15-year high, so there’s surely a bubble or two to be popped.
If tactical investors want to outperform the S&P 500 in March, they would do well to eject stocks with weak technicals or unfavorable seasonality — or both.
After screening the S&P 500 for stocks to sell, we found a number of names that historically do well in March. On average, they put up gains … but based on their charts this year, they look poised for a loss over the course of the month (and even longer). In other words, it looks like their upcoming March performance will weigh on their averages, not boost them.
From high-end retail to telecommunications, technically weak stocks can be found in some pretty disparate sectors. Based on technicals and seasonality, here are five stocks to sell for March:
Stocks to Sell: Chesapeake Energy Corporation (CHK)
Click to Enlarge Chesapeake Energy Corporation (NYSE:CHK) is having a rough time on a fundamental basis, and the technicals are working against it too.
Tumbling energy prices caused the shale-oil driller to miss Wall Street’s profit estimate in the most recent quarter. More worrisome, CHK is scaling back its rig operations to levels last seen in 2004.
Chesapeake shares have been in a downtrend since October, when its stock described a death cross. Sure, it’s tested its 50-day moving average a couple of times since then, but the gains didn’t stick. With CHK trading more than 8% below its 50-day, the price momentum is all to the downside.
The final mark against CHK is that March is a historically weak month for the stock. Over the last decade, shares have suffered an average price loss of 1.3% during the month, according to data from Thomson Reuters Stock Reports.
Stocks to Sell: Michael Kors Holdings Limited (KORS)
Click to Enlarge Luxury fashion retailer Michael Kors Holdings Ltd (NYSE:KORS) was one of the hottest stocks of the past couple of years. But the mojo has gone away. KORS became overexposed, for one thing, which diluted the brand’s cache. Furthermore, slumping sales have forced KORS to cut prices.
KORS hasn’t been around that long — it went public at the end of 2011 — but in its short life, it hasn’t had much use for March. KORS has produced an average loss of 0.4% for the month.
That seasonal weakness looks assured this year too. KORS is in a downtrend, having hit a death cross last summer. Shares are about 4% below their 50-day moving average and have failed repeatedly to break that resistance. With all the momentum to the downside, KORS is definitely one of March’s stocks to sell.
Stocks to Sell: Windstream Holdings, Inc. (WIN)
Click to Enlarge More often than not, telecom Windstream Holdings, Inc. (NASDAQ:WIN) ranks as the stocks with the highest dividend yield in the S&P 500. Heck, with a yield of 11%, WIN throws off more income than a low-quality junk bond.
Interestingly, WIN was also a price appreciation hero for the first half 2014 by gaining roughly 50%. And then WIN gave it all back. Shares are back to year-ago levels.
Seasonality favors WIN, gaining an average of 1.6% in March, but it doesn’t look like it will live up to that performance this year. WIN carved out a death cross in mid-December and now sits well below it’s 200-day moving average. And speaking of the 200-day, that long-term trend indicator recently turned down. At the same time, it’s trapped by resistance at the 50-day MA.
Stocks to Sell: CenturyLink Inc (CTL)
Click to Enlarge CenturyLink Inc (NYSE:CTL) is another telecommunications stock with a high dividend yield that had a remarkably strong 2014. Unfortunately, like Windstream, it looks like the party’s over for this name.
CTL described a death cross as recently as last week, and the 50-day moving average has gone from providing to support to resistance. It also plunged through support at the 50-day. And although CTL is still closer to its 52-week high than low, it’s far enough away — 18% — to expect more weakness ahead.
Poor seasonal returns close the case on CTL as one of our stocks to sell. Historically, it falls an average of 0.4% in March.
If you’re looking for a bright spot, CTL does sport a dividend yield of 5.5%. But given the weak technicals, CTL looks set for declines in March this year too.
Stocks to Sell: PVH Corp (PVH)
Click to Enlarge Apparel company PVH Corp (NYSE:PVH) avoided the worst of the L.A. port strike thanks to its reliance on East Coast shipping, but that won’t keep the stock afloat in March. Not when technical weakness more than offsets strong seasonality.
Sure, on average PVH enjoys a March gain of a whopping 8%, but this year looks to disappoint. And although PVH is typically a low-volatility stock, the poor technicals have it bouncing around pretty violently this year.
PVH made a death cross in early February and now finds resistance at both its 50-day and 200-day moving averages. PVH came back sharply from a recent plunge after some research from JPMorgan shredded its earnings prospects, but without any price momentum, that’s more than likely a dead-cat bounce.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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