It’s not to hard to find big-name stocks to sell if you’re looking to pare your portfolio in August. Since 1928, the S&P 500 sees an average price gain of just 0.7% in the month, so tactical investors can do well to shed ugly stocks — especially larger-cap ones with less growth potential.
That’s why it’s alarming that a number of components of the Dow Jones Industrial Average, as well as some other multinational mega-cap stocks, are breaking down these days. In addition to deteriorating technicals, most multinational blue chips are suffering from an assault — on their fundamentals.
Sluggish global growth and the strong dollar likely will go hand-in-hand with ugly charts to conspire against these names in the weeks ahead. A long track record of poor seasonality won’t help matters either.
After screening the S&P 500 for securities with deteriorating technicals, we found four mega-caps and one large-cap stock that are laboring under one of the most ominous sell signals: the death cross. In some cases, these stocks were carving out death crosses even before reporting disappointing earnings. In other cases, dud reports pushed shares into the bearish formation, and they haven’t recovered yet.
Either way, tactical investors would do well to excise these names from their portfolios now. Here are the five biggest stocks to sell for August:
Stocks to Sell for August: 3M (MMM)
On a seasonal basis, 3M can’t be counted on for positive price performance, anyway — it loses an average of 0.9% in August, according to Thomson Reuters Stock Reports — and this year should be worse.
Shares held up well after making a death cross in early July, but the resilience was only temporary. After 3M cut its organic growth forecast — an apparently unforgivable move — shares went into a tailspin.
True, 3M is still well above its 52-week low, so that lessens some of the downside momentum, but the upside looks to be capped too. 3M fell below its 50-week average last winter and has found solid resistance at that level ever since.
Stocks to Sell for August: Oracle (ORCL)
Click to Enlarge You can add Oracle (ORCL) to the list of mega-cap multinationals suffering from poor fundamentals and technicals, but its grueling transition to the cloud is more to blame than macroeconomic conditions.
Fiscal Q4 is supposed to be the company’s strongest quarter. Instead, profits and sales missed Wall Street estimates, crushed by revenue weakness in everything from licensing to software to hardware systems.
ORCL stock has been in a steep downtrend ever since, hitting a death cross in in late July that only added to the downside momentum. True, Oracle bounced off a YTD bottom a couple of sessions ago, but that’s likely just a temporary pause before challenging its 52-week low.
Seasonality is also working against ORCL. It has lost an average of 0.7% in August over the past 10 years.
Stocks to Sell for August: Texas Instruments (TXN)
And this was all before a weak quarterly report kicked shares when they were down. Weak demand for chips caused revenue to miss analysts’ average estimate. TXN added to the pain by issuing a weak top-line forecast, too.
TXN stock is trading significantly below its 50-day and 200-day moving averages and has struggled with resistance at the 50-day since March.
With no upside price momentum in sight, Texas Instruments will be lucky to achieve its average annual performance this month, which is essentially flat over the last decade.
Stocks to Sell for August: United Technologies (UTX)
UTX cut its earnings outlook because slow growth in Europe and China — and the effects of the strong dollar — crushed top- and bottom-line results.
The bad earnings news tipped UTX stock into a death cross the next day. UTX then set a new 52-week low and hasn’t even extended investors the benefit of a dead-cat bounce.
In addition to poor fundamentals and technicals, UTX lacks a history of positive seasonality for this time of year. The stock gained an average of just 0.2% in August over the last decade.
Stocks to Sell for August: Verizon (VZ)
VZ stock looked like it had bottomed after carving out a death cross in early July, but disappointing Q2 revenues turned the advance into a dead-cat bounce. Moreover, the bounce came to an end when VZ resistance at its 50-day moving average.
Verizon is on the rise once again, but the chart suggests this is just another step on the stairway to further losses.
The delayed roll-out of VZ’s mobile-TV service and a track record of losing 1.2% in August don’t bode well for the blue chip in the weeks ahead.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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