Tactical investors are always looking for stocks to sell, but they might just want to double down on the process this year. After all, stocks are broadly working against your returns right now, while heightened volatility is only magnifying the potential for losses.
On a seasonal basis, March is typically pretty good for market performance, with a long-term average gain of 0.6%, according to Yardeni Research.
Unfortunately, this doesn’t feel like a typical year.
If we’re lucky, the S&P 500’s current short-term upswing will keep going and make March a winner this year too. But with so much roiling equities right now — oil prices, the dollar, monetary policy, economic and political uncertainty — it’s not the strongest bet.
As such, defense remains the order of the day for tactical investors. Any holding that sets up your portfolio for underperformance — especially to the downside — should get the ax.
One of the best ways to find stocks set for short-term sluggishness is to look for some basic technical red flags and a history of seasonal weakness. Of course, with so many stocks struggling this year, it’s not hard to suss out technical sell signals, so we concentrated our efforts on the S&P 500.
Among a long list of candidates, these are the top five S&P 500 stocks to sell on technicals and seasonality for March:
Stocks to Sell: American Tower Corp (AMT)
Click to Enlarge American Tower Corp (AMT) isn’t exactly known for its spectacular seasonal strength, and now the technicals are crumbling as well.
Shares have been making lower highs and lower lows since November. Now word that Sprint Corp (S) is planning to move leases away from the cell-tower operator is yet another blow.
Sure, AMT bounced smartly off a low earlier this month, but it also carved out the sell signal of a death cross at about the same. That makes the three-month trading pattern of head-fake rallies look intact.
As for seasonality, over the past decade, AMT has lost an average of 0.5% in March, according to data from Thomson Reuters Stock Reports.
Stocks to Sell: Amgen, Inc. (AMGN)
Click to Enlarge Amgen, Inc. (AMGN) doesn’t have a good March track record as it is. On top of that, biotech broadly is in a bear market. And now, the technicals are conspiring against shares as well.
Over the past decade, AMGN has dropped an average of 0.2% in March, according to Thomson Reuters Stock Reports. True, that’s just an average, but shares are poised for more pain.
AMGN started the year by plummeting through its 50- and 200-day moving averages, and has been making lower highs and lower lows ever since.
Then Amgen piled on its technical trainwreck by carving out a death cross — with the 50-day MA dropping below the 200-day MA — a couple of weeks ago.
Stocks to Sell: Cardinal Health Inc (CAH)
Click to Enlarge As a drug wholesaler, the current climate isn’t so great for Cardinal Health Inc (CAH).
Drug pricing and health insurance have become talking points in this year’s election season. No wonder the healthcare sector is in a downtrend.
Add seasonal weakness — CAH has lost an average of 0.8% over the past 10 years — and the bias on this name is to the downside.
The charts are looking pretty bearish, too. Shares made a death cross in mid-February, making the rally off an earlier low look suspiciously like a dead-cat bounce.
Stocks to Sell: Phillips 66 (PSX)
Click to Enlarge Ordinarily, oil and gas stocks as a group perform well at this time of year.
Too bad there’s nothing ordinary about today’s energy market.
Phillips 66 (PSX) only has a couple Marches as an independent company under its belt; however, PSX is actually a big winner in this month, putting up an average gain of 4.7%.
Macroeconomic and technical obstacles make it hard to see that kind of positive performance happening this year.
PSX started 2016 by turning support at its 50-day moving average into resistance. Indeed, the stock has made two failed attempts at breaking through in the last week — and then scribbled out a death cross.
Stocks to Sell: Tesoro Corporation (TSO)
Click to Enlarge Like PSX, Tesoro Corporation (TSO) is an oil and gas company that usually delivers seasonal strength in late winter and early spring. Shares have put up an average price increase of 2.4% over the last 10 years.
Between macro and technical headwinds, this year looks different for Tesoro as well.
The avalanche in TSO stock started back in early December by falling through its 200-day moving average. A month later it cracked the 50-day on the way down.
Last week, Tesoro hit a low not seen since January 2015. Shares bounced sharply off that low, but the momentum is already petering out after back-to-back selloffs into the close.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.