“Sell in May and go away” is a tired cliche with little basis in fact — indeed, July is the single best month for market performance — but it’s sure to have some tactical investors hunting around their portfolios looking for stocks to sell.
Since 1928, the S&P 500 generated an average monthly loss of 0.2% in May — only the month of September has a worse performance. Barring a broad-market selloff or full-blown correction, not everything is likely to go down in May … but we can expect weakness to abound.
Pruning your portfolio now will raise the odds of outperforming the broader market in May. Equities suddenly look to be under a little pressure as is, so any name with technical weaknesses and a poor track record around this time of year is an obvious candidate for selling.
After all, it’s important to pare dead weight even in good times. It’s even more important when the market is soft. As the saying goes, take care of the downside, and the upside will take care of itself.
With that in mind, we’ve screened the S&P 500 for stocks to sell, looking for technical red flags and poor seasonality. Add in some fundamental headwinds, and these names definitely look bound for the trash heap in May:
Stocks to Sell for May: Airgas, Inc. (ARG)
Click to Enlarge Airgas, Inc. (NYSE:ARG) actually has a good track record at this time of year. Over the last decade, ARG gained an average of 4% in April and 2.7% in May, according to Thomson Reuters Stock Reports.
However, weak technicals and a cut to estimated earnings will make those type of gains unachievable this year.
The industrial gas and welding equipment supplier got off to a slow start in 2015. Sales are slow because of the drop in oil prices and the stronger U.S. dollar. And those problems aren’t going to magically disappear in May.
The technicals are working against ARG, too. Shares carved out the sell signal of a death cross in late April, and the 200-day moving average is flattening out.
Further weakness will have Airgas trending down — a sign of a sick stock.
Stocks to Sell for May: Duke Energy Corp (DUK)
DUK is roughly 13% below its 52-week high and hit a death cross last month. Furthermore, DUK has a long history of negative price performance in May, losing an average of 2.7%.
It’s possible DUK could get a lift when it reports quarterly earnings on May 1, but the broader picture still looks like one of losses.
Again, the entire utilities sector is down so far this year. Just have a look at the Vanguard Utilities ETF (NYSEARCA:VPU), which is down more than 5% year-to-date. DUK competitors Southern Co (NYSE:SO) and PPL Corporation (NYSE:PPL) hit death crosses recently too.
There’s little reason to see DUK bucking the sector-wide trend.
Stocks to Sell for May: HCP, Inc. (HCP)
Click to Enlarge Healthcare real estate investment trust HCP, Inc. (NYSE:HCP) made a death cross of its own in the first half of April, and the some fundamental problems are weighing on shares, as well.
The U.S. Department of Justice filed a lawsuit against one of HCP’s clients over the company’s billing practices. Additionally, a non-cash impairment charge related to a lease with the same client led HCP to cut its full-year earnings forecast.
Poor seasonality is working against HCP too. The stock has a history of losing 2.3% in May and another 3.4% in June, according to Thomson Reuters Stock Reports.
With shares closer to their 52-week low than they are to their 52-week high, HCP can be counted on to have yet another weak showing in May.
Stocks to Sell for May: Symantec Corporation (SYMC)
Click to Enlarge Symantec Corporation (NASDAQ:SYMC) is seeking a buyer for the long-time albatross of its data-storage business … and it’s not going smoothly.
Investors have been pressuring the company to sell the business ever since it was created by SYMC’s 2005 acquisition of Veritas, so you’d think they’d be happy with the news. Unfortunately for SYMC, there isn’t a lot of demand for legacy data-storage providers.
Symantec usually doesn’t have a bad time of it in May — on average, it rises 1% — but this year looks to be different. It has a track record of losing 1.7% in June, and that weakness could come early this year, as SYMC described a death cross in mid-April.
Shares showed some signs of life in the aftermath, but appear to be rolling over once more.
Stocks to Sell for May: Weyerhaeuser Co (WY)
Click to Enlarge Weyerhaeuser Co (NYSE:WY) is entering a seasonally unfavorable period for its stock. Macroeconomic headwinds further complicate the picture. And now that WY made a death cross last month, a loss for May looks more likely than not.
As one of the world’s largest owners of timberland, WY expects to benefit from a recovery in the U.S. housing market and shortage of supply from Canada, but market sentiment isn’t following suit.
Rather, the market is focused on how WY missed quarterly estimates and continues to grapple with lower demand from China and Japan.
WY has lost an average of 3.6% in May and 4.6% in June over the last 10 years. After carving out a death cross in April, WY looks good for a couple of months of declines this year too.
Investors’ best hope of a change of pace — Weyerhaeuser’s next earnings report, due out Friday, May 1. Of course, it also could be the catalyst for continued weakness in May.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.