With just one month left in the calendar year, tactical investors are running out of time to put up market-beating returns for 2016. If you find yourself in such a position, it’s imperative that you find stocks to sell in your portfolio, lest they weigh on what is traditionally a great month for equities.
Indeed, going all the way back to 1928, December has been the second-best month for the S&P 500, generating an average price gain of 1.4%, according to Yardeni Research. Only July, which averages a 1.5% gain, tops that average performance.
Whether it’s the Santa Claus rally, fund managers window dressing results or the phases of the moon, the market likes to rise into year-end, so don’t let any technically or seasonally weak names act as anchors on your portfolio.
And make no mistake, when it comes to tactical investing, there are always albatross stocks to sell.
That’s especially true this year because of the wide gap between the have and have-not stocks. The so-called FANG stocks — Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet’s (GOOGL) Google — have driven a disproportionate amount of the market’s gains this year.
On the other side of the ledger, the average U.S. stock has failed to beat the broader market this year and most domestic equities are actually in negative territory YTD, according to FT.com.
Such disparities leave no shortage of stocks to sell for December. After searching the market for names with technical and seasonal weakness, here’s what we found.
Stocks to Sell: Best Buy (BBY)
Best Buy (BBY) has racked up some disastrous holiday selling seasons in years past, and the market appears to be anticipating yet another one.
The besieged consumer electronics chain has made significant strides in its turnaround, but the technicals and its own ugly trading history make BBY a sell before we close out the year.
BBY stock is off nearly 20% for the year-to-date after carving out the sell signal of a death cross a couple of weeks ago. Keep in mind that the last time BBY made a death cross, shares went on to lose almost 14% before bottoming out.
Lastly, the market tends to position itself for BBY disclosing sad holiday results when it reports earnings in the early part of the following year. Over the last decade, BBY delivered an average price loss of 2.5% in December, according to data from Thomson Reuters Stock Reports.
Stocks to Sell: Molina Healthcare (MOH)
Like the rest of the sector, Molina Healthcare (MOH) enjoyed a good, long run on the anticipation and implementation of the Affordable Care Act. But after rising by more than half earlier this year, investors couldn’t resist taking some profits on MOH.
That doesn’t mean MOH is a bad stock. Heck, it’s still having a very good year. True, shares were once up more than 50% YTD, but MOH is still holding on to a market-crushing 16% gain for 2015.
The problem is that MOH has entered a downtrend, and the technicals and its own trading history suggest a bottom has yet to be found.
Indeed, MOH is down 26% from its most recent peak, putting it well into a bear market. The selloff also led shares through a death cross last month. As for seasonality, MOH tends to be a market laggard in December, producing an average price gain of just 0.6%.
Stocks to Sell: Pandora Media (P)
Pandora Media (P) hasn’t been around that long, but shares in the streaming music service have a terrible seasonal track record.
Since, going public in 2011, Pandora has generated an average price loss of 3% in December even though much of that time was a period of solid sentiment on the name.
With Apple (AAPL), Amazon, Google, Spotify and others fighting for market share, Pandora couldn’t find tougher competition if it tried.
Pandora is growing through acquisitions and international expansion, but that’s not enough to overcome Apple Music, alone, much less an army of rivals. Witness the massive October plunge in P stock after it released disappointing results, courtesy of Apple Music taking share.
Pandora has struggled to recover from that vertical decline and is still down 20% YTD. Throw in a recent death cross, and Pandora stock has more downside ahead.
Stocks to Sell: Seattle Genetics (SGEN)
Biotechnology stocks are struggling these days and Seattle Genetics (SGEN) is no exception.
The stock has fallen sharply from its YTD peak, but is still up about 28% so far this year. Given the weak technicals and poor seasonality, investors can expect more selling pressure in December. In other words, it’s time to take your chips off the table.
SGEN described a death cross at the end of November and has since crashed through its 50- and 200-day moving averages in a bearish manner. With those key level set to shift from support to resistance, SGEN could revisit the lows of two months ago.
Historically, the market has never much liked Seattle Genetics at this time of year, either. Over the past decade, shares have delivered an average price decline of 1.8%.
Stocks to Sell: Tesla Motors (TSLA)
You can make an argument for Tesla Motors (TSLA) as a swing-for-the-fences play on a revolution in transportation, but for the coming month, at least, it looks poised for one of its typical periods of weakness.
This will come as no surprise to anyone who’s held TSLA for a while. As a pricey momentum stock that trades in hope and hype as much as fundamentals, TSLA gets more than its fair share of knee-jerk trading every time news crosses the tape.
As for TSLA right now, shares recently made a death cross, and the stock twice found resistance at its 200-day moving average last month.
The market also tends to play Scrooge with Tesla stock around the holidays. Since going public five years ago, shares have produced an average price loss of 5.6% in the final month of the year.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned industries.