On Thursday, the Dow Jones Industrial Average slipped to six-month lows, the index of large caps falling for the sixth day in a row and marking the 11th decline of the past 13 days.
Sellers are being driven by an ongoing breakdown in market breadth (or the percentage of stocks in uptrends), the meltdown in the commodities complex, fears over a possible September rate hike by the Federal Reserve, pressure in the high-yield bond market, underwhelming corporate earnings and concerns about the health of the Chinese economy.
With these pressures set to continue, I’ve recommended my clients maintain a defensive positioning. The ProShares UltraShort Russell 2000 (TWM) recommended to Edge subscribers is up 12.2% since June 24, while the ProShares UltraShort Crude Oil (SCO) is up more than 64%.
Proving that no stock, no matter how popular, is immune to the selling here, are seven large caps to sell as the selloff deepens.
Iconic Large Caps to Sell: Disney (DIS)
On Wednesday night, disappointment over Disney’s (DIS) revenues and free cash flow caused the popular stock to slam down 9.2%. Investors were also worried by comments from executives on the conference call that TV subscribers were moving away from traditional cable packages, which is bad news for its ESPN business.
Wednesday’s beating proved once again that the trend is your friend, until it isn’t. Shares were down another few percentage points on Thursday, taking DIS stock back to levels not seen since early April.
The result is that Disney shares are on track for their worst two-day loss, in percentage terms, since 2002.
Iconic Large Caps to Sell: General Electric (GE)
As General Electric (GE) goes, so goes the overall market as the diversified industrial giant represents a broad cross-section of the U.S. economy. And after peaking in April, shares of this blue chip have been on the slide, threatening to fall below their 200-day moving average. The Aug $27 GE puts I recommended to Edge Pro subscribers on July 21 are up 165%.
In what you’ll see is a familiar theme among these struggling large caps, General Electric reported weaker-than-expected earnings on July 17.
Iconic Large Caps to Sell: Apple (AAPL)
Apple’s (AAPL) fall from grace over the last few weeks — resulting in the first downward cross of the 200-day moving average since 2012 — has been well publicized. Slow iPhone sales and a loss of market share in China are ruining a big portion of the bull thesis on the stock.
A similar slowdown is underway in the broad tablets market, leaving investors wondering where the next big source of revenue growth will come from — especially considering that Apple’s larger iPhone 6 Plus is believed to be cutting into iPad sales.
I explored a few reasons to be bearish on AAPL in a recent post.
Iconic Large Caps to Sell: Tesla Motors (TSLA)
Shares of Tesla Motors (TSLA), everyone’s favorite electric vehicle-maker, are being slammed more than 10% on Thursday after reporting smaller margins, fewer deliveries and rapid cash burn. The big worry was the pullback of full-year deliveries guidance from a solid 55,000 to a range of 50,000 to 55,000.
A similarly aggressive selloff back in December resulted in four months of listlessness before the bulls got back in — reason enough to worry about TSLA’s near-term prospects.
Iconic Large Caps to Sell: Procter & Gamble (PG)
Procter & Gamble (PG) shares dropped hard out of a little two-month uptrend at the end of July after reporting quarterly results and forward guidance that weren’t seen as game-changers for the stock — pushing PG to lows not seen since last summer.
Core earnings grew 8% last quarter, but analysts noted that was more a function of cost cutting rather than a pickup in demand. Organic sales for the period were unchanged due to lower shipment volume.
Until P&G can address its lack of traction on innovation, its shares should be avoided.
Iconic Large Caps to Sell: Exxon Mobil (XOM)
The energy-sector crunch continues as crude oil prices returned to their March lows near $44 a barrel after Goldman Sachs released a report concerned about rapidly diminishing tank capacity. The market is oversupplied as Saudi Arabia keeps the heat on shale oil producers, who in turn are refocusing on their most productive wells and actually increased their U.S. drilling rig count.
The approach of the end of the summer driving season means we’re likely to see oil prices break into the $30s. Despite Exxon Mobil’s (XOM) return to levels last seen in 2012, there is more downside in store as onshore oil storage tops out.
Iconic Large Caps to Sell: Yahoo (YHOO)
Yahoo (YHOO) has returned to levels last seen in November as the boost from its Alibaba (BABA) stake has faded (right along with excitement with Chinese stocks in general). BABA is trading near post-IPO lows around $80, undermining a big reason people were interested in YHOO last autumn.
On July 21, Yahoo reported weaker-than-expected earnings on a drop in display add prices and PC-based revenues while also issuing lower-than-expected forward guidance. With the bulk (79%) of its top line sales coming from the PC platform, which is weakening, the company continues to struggle to implement strategic change.
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