It’s get harder and harder to find stocks to sell as we approach the end of the year. After all, we’re in the midst of the best three-month period for equities, and gains only accelerate over the course of the fourth quarter.
Indeed, the S&P 500 generates an average price gain of 0.7% in November, according to Yardeni Research. (October is good for 0.4% and December contributes 1.4%.)
At the same time, a disappointing year in stocks means investors are running out of time to put their 2015 performances in order. The broader market only recently turned positive for the year-to-date, and even then it’s up only about 1%.
As always, any tactical investor looking to outperform the market’s short term performance has to pare stocks from his or her portfolio to keep them from dragging on returns. When gains are so hard to come by, it’s more important than ever to make sure you cull the losers.
Fortunately, technical analysis and seasonality can help identify stocks to sell heading into the month ahead. Stocks raising technical warning flags always bear watching. And if they have a history of poor monthly performance, they are certainly at least candidates for profit taking.
After screening the market for large-cap stocks exhibiting technical and seasonal weakness, we identified these five companies as stocks to sell for November.
In no particular order …
Stocks to Sell: CME Group Inc (CME)
Click to Enlarge Exchange operator CME Group (CME) group enjoys relatively high margins from the trading of products such as futures and derivatives, but Wall Street has become concerned about volumes. That has been weighing on shares and creating some technical weakness.
Indeed, CME fell through its 50-day moving average and its 200-day MA in the space of two days in late August. The stock found resistance at its 200-day MA at he beginning of October, then carved out the sell signal of a death cross a couple of weeks ago.
Seasonality doesn’t favor CME group this month, either. During the past 10 years, CME stock has recorded an average price loss of 0.5%, according to data from Thomson Reuters Stock Reports.
Stocks to Sell: Jarden Corp (JAH)
Click to Enlarge Jarden (JAH) stock got a nice bump when it acquired yearbook company Jostens for $1.5 billion two weeks ago, but the euphoria couldn’t last.
When a company sells everything from Mr. Coffee to Rawlings baseball gloves, it’s dependent on Walmart (WMT), and the big-box retailer has been struggling of late.
In addition to those fundamental problems, technical weakness and a bad track record for this time of year put JAH investors on short-term notice. JAH breached it 50-day MA in August, and definitely broke its 200-day MA a month later. And after making a death cross mid-October, JAH is back to levels not seen since the first month of the year.
With an average loss of 1.7% in November, investors are typically not too keen on JAH at this time of year, either.
Stocks to Sell: JPMorgan Chase & Co. (JPM)
Click to Enlarge The nation’s biggest bank by assets makes a surprise appearance on this list of stocks to sell for the short term, but if history is any guide, it won’t last long.
JPMorgan Chase (JPM) traditionally sees a price loss of 1.8% in November but bounces back in a big way in December. Indeed, over the last decade, JPM stock has gained an average of 5.8% in the last month of the year.
Like all the big banks, JPM is getting squeezed by ultra-low interest rates and sluggish trading volumes for lucrative products like fixed income, currencies and commodities. And now JPM stock is flashing technical warnings signs too. Shares are finding resistance at its 200-day MA, just a short while after they drew up a dreaded death cross in mid-October.
Stocks to Sell: Ross Stores, Inc. (ROST)
Ross blamed macroeconomic woes, which is probably fair enough. Retail sales aren’t showing the kind of growth economists expected as gas prices plunge. Furthermore, discount shoppers aren’t benefiting as much from a better economy as folks with a bit more discretionary income.
Against that backdrop, shares have repeatedly found resistance at their 200-day MA for more than two months now. The 200-day MA is flattening out and ROST went through a death cross about two weeks ago. A 10-year average price performance of 0% doesn’t make much of case for ROST this month as well.
Stocks to Sell: Vertex Pharmaceuticals Incorporated (VRTX)
In addition to the sector-wide selloff, VRTX has been hit by rising fears of competition in the cystic fibrosis market, which it currently owns. Between those two forces, VRTX sank below its 50-day and 200-day moving averages in a single session and is still struggling to come back.
A recent death cross and flat 200-day MA don’t bode well for VRTX all by themselves, but shares are also entering a seasonally unfavorable time. Over the last 10 years, VRTX has generated average price losses of 4.7% in November and 3.2% in December.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.