July is typically the S&P 500’s best month of the year, so who needs to worry about finding stocks to sell?
Tactical investors, that’s who.
A historically strong month for stocks actually raises the bar for anyone looking to beat the market short term. And make no mistake, the bar is high.
Going back many decades, the S&P 500 has an average July price gain of 1.5%, according to Yardeni Research. No other month has a better track record. But even stocks that look poised for July gains can be stocks to sell if they fail to keep up with the benchmark index. After all, even “good” stocks can be a drag on overall performance.
This year might be very different. We’re talking about an average here, and Brexit fears are going to be a wildcard for the foreseeable future. But that’s no excuse for tacticians to throw up their hands. Technical warnings signs, seasonality and other price metrics can at least tip the odds in their favor when looking for stocks to sell.
A screen of the S&P 500 for stocks with technical weakness, a history of underperformance and fundamental concerns coughed up a short list of names likely to disappoint this year.
Of those, these are the five stocks to sell that have the worst prospects for short-term market outperformance.
Stocks to Sell for July: Anthem Inc (NYSE:ANTM)
It’s not like the market was wowed by Anthem Inc‘s (NYSE:ANTM) deal to buy Cigna Corporation (NYSE:CI), but it sure is worried that the deal won’t go through.
But now that antitrust concerns might scuttle the $54 billion merger between the health insurance giants, ANTM’s technicals are falling apart.
Shares recently made the sell signal of a death cross and have entered a seasonally weak period. Over the last decade, ANTM has logged an average July price decline of 0.4%, according to Thomson Reuters Stock Reports.
Additionally, this is a stock that loves to trade under its 200-day moving average. There’s too much baggage here.
Stocks to Sell for July: ConocoPhillips (NYSE:COP)
The good news for oil companies like ConocoPhillips (NYSE:COP) is that crude prices look to be definitively off the mat. The bad news is that the market is afraid they’ve found a ceiling at $50 a barrel. That makes it hard to judge if more gains are warranted, and the technicals are negative too.
COP is slicing through a death cross, and previous support at the 50-DMA now looks like resistance. Meanwhile, the 200-DMA has kept on lid on shares for more than a year.
Then there’s seasonality, which is also working against the name. COP lost an average of 1.8% in July and 0.8% in August over the last 10 years.
Stocks to Sell for July: Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG)
On a seasonal basis, Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) should have a terrific month. It typically gains 3.2% in July, according to Thomson Reuters.
On the other hand, it doesn’t usually enter July with technical weakness.
GOOGL carved out a death cross recently and is getting squeezed by its DMAs. Shares fell below the 50-day in April and failed twice to break resistance since. Sure, they would reliably find support at the 200-DMA, but that looks like it’s over. Shares tumbled through that key level earlier this month.
Analysts are saying that GOOGL’s multiple has to reflect the Brexit uncertainty. They’re not talking about multiple expansion.
Stocks to Sell for July: Hormel Foods Corp (NYSE:HRL)
Hormel Foods Corp (NYSE:HRL) can usually be counted on for a decent — if underperforming — July, but not this time around. Shares crashed through their 50-DMA in April and cannonballed past the 200 in May. A recent death cross and suspect fundamentals look like stiff headwinds in the short term.
With an average gain of 0.9%, HRL has a history of lagging the broader market in July. On that basis alone it would be a stock to sell, but a failure to mount any kind of a bounce after the May crash is the real worry.
HRL suffered a drop in volume and sales growth of just 1% in the last quarter.
Stocks to Sell for July: Charles Schwab Corp (NYSE:SCHW)
In ordinary times Charles Schwab Corp (NYSE:SCHW) can be counted on to deliver outsized return in July. Over the past decade, shares have delivered an average price gain of 1.7% for the month. But these are not ordinary times.
The Brexit shock touched the entire market, but no sector took it harder than financials. Although brokerages enjoy a surge in trading volume in such times, the specter of ultra-low interest rates dragging on kills the bull case on lending.
SCHW wrestled with resistance at the 200-DMA more than once this spring, and now the Brexit plummet has left it well below key levels. Throw in the reality of a death cross and SCHW won’t be mounting a test of them soon.
As of this writing Dan Burrows did not hold a position in any of the aforementioned securities.