June is historically a strong month for stock performance, but if you want some tactical outperformance, you still need to pare your portfolio.
And that means a dig in the dirt for stocks to sell.
Since 1928, the S&P 500 has produced an average price gain of 0.8% during the month of June, according to Yardeni Research. More recently, over the last two years, the broader market has put up a price gain of 1.9% for the month.
Those are fine returns … if you’re invested in just the market. Your only hope to outperform the S&P 500 is to identify stocks that’ll weigh on your portfolio, then axe them.
Technical analysis offers a number of tools for identifying stocks to sell, at least in the short term. Stocks you want to sell typically have price momentum to the downside, violated key levels and perhaps even triggered a sell signal. Meanwhile, a look at seasonality reveals some potential stocks to sell, in the form of companies that just plain underperform during this time of year, for whatever reason.
After scouring the S&P 500 for stocks with technical weakness and poor seasonality, these five names stood out as stocks to sell. These stocks range from retailers to utilities, but they all have one thing in common — they’ve all recently set off the sell signal of a death cross.
With that, here are five stocks to sell for June:
Stocks to Sell: Hershey Co (HSY)
Click to Enlarge On a fundamental basis, Hershey Co (NYSE:HSY) is having a hard time. A strong dollar, weakness in China and increased competition caused HSY to miss Wall Street’s top- and bottom-line forecasts in the most recent quarter.
Even worse, Hershey cut its sales outlook.
That caused HSY stock to carve out a death cross in mid-May, and it looks to be in force for June as well, which is something the stock really can’t afford. It’s already down more than 10% this year.
Lastly, this is typically not a good time of year for Hershey. Over the last decade, HSY lost an average of 1.5% in June, according to Thomson Reuters Stock Reports.
That combination of factors makes HSY among the most notable stocks to sell.
Stocks to Sell: TripAdvisor Inc (TRIP)
True, seasonality is on its side — shares tend to gain an average of 1.7% in June — but then, we’re looking at a small sample. TRIP has only been public since 2012.
At the same time, TRIP stock scribed out a death cross in mid-May, and the market has been acting on it ever since. Indeed, shares are off more than 4% since then.
TripAdvisor’s downtrend has been driven by lower quarterly earnings, as well as missing analysts’ profit and sales estimates. Higher costs tied to fighting off increased competition continue to worry investors.
Stocks to Sell: Wal-Mart Stores, Inc. (WMT)
Walmart has had plenty of problems over the last few years, but it’s the more recent emergence of a strong dollar that’s really hammering results.
WMT stock has never much liked this time of year, losing an average of 1.1% in June over the last 10 years. This year looks to be no exception.
In early May, Walmart made a death cross and a steep selloff soon followed. WMT stock is already off more than 12% for the year-to-date, and June looks like it will offer sideways trading at best.
If you were on the fence about Walmart, don’t be — put it on your list of stocks to sell.
Stocks to Sell: Motorola Solutions Inc (MSI)
Click to Enlarge Motorola Solutions Inc (NYSE:MSI) beat Street earnings estimates in the most recent quarter, but profit still declined on flat revenue, and it looks like business is only going to get worse.
Goldman Sachs downgraded MSI to a “sell” last month because the public safety industry is moving toward new communications technology (and more importantly, away from Motorola’s legacy products).
True, if the company is put up for sale — as has been rumored — MSI could get a bump. Barring that, it doesn’t look good. A tendency to lose 3% in June makes MSI look like a dog on a seasonal basis.
Throw in a death cross, and MSI easily falls into this bucket of stocks to sell.
Stocks to Sell: Teradata Corporation (NYSE:TDC)
The data-management company is under increasing competition in the fields of analytics and Big Data, and it shows up in results. TDC missed top- and bottom-line forecasts for the most recent quarter, and has now lost about 25% of its value in the last two years.
Of course, bearish sentiment toward Teradata isn’t anything new. TDC has been a long-term “sell,” and June looks to add to the pain. On a seasonal basis, TDC lost an average of 2% during the month over the last 10 years, and a mid-May death cross has it sitting at five-year lows.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.