Finding stocks to sell among your holdings becomes increasingly important as we approach the end of the year, especially in a down market. Time is running out if you need to salvage your portfolio before we close the trading books on 2015.
The fourth quarter happens to be a time of strong and accelerating performance for the broader market. Over the very long term, the S&P 500 averages a gain of 0.4% in October, 0.7% in November and 1.4% in December.
However, getting the most out of that seasonality is another matter. Plenty of stocks are entering a period of poor seasonality. Furthermore, a number of names are flashing technical warning signs.
If a tactical investor is to make the best of what should be a better quarter for the market, it’s imperative to find stocks to sell in a portfolio, lest they act as a countervailing force against hard-won gains.
To make that job a little easier, we screened the market for stocks that have a history of poor seasonality, have described a death cross and have fundamental headwinds, too. After all, ugly technicals are bad news for any stock, but negative news flow is worse. Taken together, they’re great indictors of stocks to sell.
With that, here are five stocks to sell for October.
Stocks to Sell: Anthem (ANTM)
Washington is taking a hard look at the acquisition because it raises anti-trust concerns. If ANTM takes over CI and Aetna (AET) swallows Humana (HUM) as planned, the number of major health insurance companies will drop to three from five.
ANTM stock dove after a Senate subcommittee questioned the wisdom of the merger, putting the stock through the dreaded death cross.
In another short-term knock against ANTM, shares have dropped an average of 0.5% over the last 10 years, according to data from Thomson Reuters Stock Reports.
Stocks to Sell: BB&T (BBT)
Click to EnlargeBB&T(BBT) is hardly alone when it comes to regional bank stocks having a hard time because of the Federal Reserve, but disturbing technicals and seasonality make it a standout this month.
Like all banks, BB&T needs the Fed to raise interest rates in order to become more profitable, and every time the rate setting committee puts it off — or the market thinks it will — BBT shares tank.
BB&T stock reliably found support at its 50-day moving average for six months on rate hike optimism. When that didn’t materialize at the latest Fed meeting, BBT carved out a death cross, setting it up for more short-term distress.
Meanwhile, investors can forget about seasonality supporting shares in October. Over the last decade, BBT stock has dropped an average of 2.2% during the month.
Stocks to Sell: General Electric (GE)
As a multinational and industrial, GE is getting hit by both the higher dollar and the rout in oil prices. The Chinese economy is slowing at an alarming rate, and other critical emerging markets such as Russia and Brazil are in recession.
GE stock first flashed warnings signs when it fell through its 50-day MA at the beginning of the summer, which made that key level a source of resistance. A death cross at the beginning of September only pressures shares further.
Lastly, the market isn’t a fan at this time of year. GE has a 10-year average decline of 2.6% in October.
Stocks to Sell: GoPro (GPRO)
GoPro hasn’t been around long enough to have a seasonal trend, but ugly technicals are reason enough to ditch GPRO as October gets underway.
GPRO failed to make anything of a golden cross in late July. Rather, it soon went into steep downtrend culminating in a recent death cross. The fact that GPRO has fallen 67% over the past 52 weeks doesn’t instill confidence, either.
The proximate cause for the latest slump was GPRO’s failure to launch a marquee product ahead of the holiday selling season. The company’s first-ever price cut on one of its models raises alarm bells, too.
Stocks to Sell: Lululemon Athletica (LULU)
Click to EnlargeLululemon (LULU) traded sideways for six months, and it turns out that was the good part. The market killed LULU stock after it issued a disappointing current-quarter forecast, even though earnings weren’t bad at all.
That turn in sentiment has been a long time coming. The emergence of so-called Athleisure wear has attracted a horde of competitors. Fighting off Nike (NKE) and Under Armor (UA) was hard enough. Now that retailers from Gap (GPS) to Kohl’s (KSS) are chasing the market, LULU’s margins could be in major trouble.
Interestingly, LULU has a history of disappointing returns heading into the holiday season. Shares have fallen an average of 0.1% in October and 0.6% in November going back 10 years.
A mid-September death cross seals the case for LULU as a stock to sell this month.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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