Yes, the stock market is rebounding well following Friday’s steep selloff. But as just about any longtime follower of the market will tell you, Septembers can be rough.
And this September could be particularly hairy.
Not only are stocks overbought thanks to their 20%-plus rally from February’s low, the month of September itself is more often than not a bearish one … with some Septembers dishing out jaw-dropping losses.
With that as the backdrop, now’s a good time to perhaps take profits on all stocks you’re not truly committed to for the long haul. Indeed, there are some names that are looking particularly vulnerable to a pullback.
Here’s a look at the market’s 10 top stocks to sell before it’s too late.
Stocks to Sell Soon #1: Sprint (S)
Sprint Corp (NYSE:S) shares jumped 27% on July 25, following an announcement from the company that it would finally be ending its compelling but costly offer to slash competitors’ customers’ bills in half if they’d switch service providers.
S stock has continued to climb in the meantime, and is currently up 44% since making the decision to take the deal off the table.
What has been less-touted is that Sprint put a stunningly generous — and expensive — offer right back in place a few weeks later, suggesting the only reason the carrier was able to muster the growth it did was by essentially giving service away.
The net fiscal impact of the revived inventive deal won’t be clear until Sprint reports its next round of quarterly numbers in late October. But as more and more investors put two and two together and realize margins may not be improving after all, it could put an added amount of pressure on the stock.
My colleague, Brian Nichols, believes Sprint stock could go down soon. I agree.
Stocks to Sell Soon #2: Finisar (FNSR)
Sprint is hardly the only entry on a list of stocks to sell sooner than later. Add Finisar Corporation (NASDAQ:FNSR) to that list.
There’s nothing inherently wrong with telecommunication equipment maker. Sales are rising, as are profits. Indeed, FNSR stock soared 13% on Friday of last week after the company topped its quarterly earnings estimates. The stock was also highlighted by commentator Jim Cramer following the report of its results and subsequent surge.
The buzz, however, may have just reached an “as good as it gets” status, meaning there’s no more room for upside now that it’s gained 71% since mid-May. Friday’s huge bullish gap for the stock is yet another invitation for owners to start taking profits.
Better to be first than last once that move starts to materialize.
Stocks to Sell Soon #3: Mobileye (MBLY)
The headlines for Mobileye NV (NYSE:MBLY) are admittedly bullish. Less than a month ago it and Delphi Automotive PLC (NYSE:DLPH) announced a partnership to develop new self-driving technologies, Wall Street (mostly) loves the company, and self-driving automobile rival Apple Inc. (NASDAQ:AAPL) is reportedly scaling back on its effort to create its own such technology.
So why does MBLY appear on a list of stocks to sell rather than buy? Because all of that good news is already priced in, and then some.
Since February’s low, MBLY stock has doubled, even with a recent lull. Although Mobileye is arguably the centerpiece of the market — a market that’s undeniably coming — it’s going to be tough for investors to wait until 2019 for that market to explode … if it explodes then at all. More recently, investors are being forced to digest all the reasons self-driving cars may not be the big, immediate hit a few observers are suggesting.
That kind of doubt can prove to be a drag on a stock.
Stocks to Sell Soon #4: Alibaba (BABA)
There’s nothing inherently wrong with Chinese e-commerce outfit Alibaba Group Holding Ltd (NYSE:BABA). The company is still growing, and widening its profit margins. BABA shares are also up 66% since February’s bottom, confirming that traders are falling in love with the stock all over again.
But that might be a recipe for disappointment.
While Alibaba continues to grow, its sheer size makes it increasingly difficult to post the strong double-digit year-over-year growth rates that investors have become accustomed to. In fact, Alibaba is now being forced to buy growth, investing $760 million in startup Best Logistics last week. Meanwhile, its effort to gain consumer confidence by preventing the sale of counterfeit goods through its web-based mall isn’t going all that well.
It leads to a combination of weakening demand and greater expenses that the recent rally says traders aren’t expecting.
Stocks to Sell Soon #5: Acacia Communications (ACIA)
Truth be told, it’s too soon to be passing judgment on Acacia Communications, Inc. (NASDAQ:ACIA) as a company. It only went public in May of this year, and as is the case with most IPOs, where it is now as an entity isn’t where it’s apt to be once it fully matures.
On the flip side, ACIA should be numbered among the market’s stocks to sell right now because it’s done the same thing most other newly public stocks do shortly after their IPOs. That is, it has run up too far on hype, and now all those buyers of the initial public offer have room and reason to sell.
ACIA has started to peel back over the course of the past few days, feeling the weight of the 440% gain since it went public.
Stocks to Sell Soon #6: Yelp (YELP)
Giving credit where credit is due, online review website Yelp Inc (NYSE:YELP) managed to top its revenue and earnings estimates last quarter, driving YELP shares 20% higher in August. The company upped its full-year guidance as well.
On the other hand, while the knee-jerk reaction to report and outlook was bullish, as time passes, the market is going to realize that “better” for Yelp still isn’t all that good.
The forward-looking price-to-earnings ratio is still a triple-digit figure, and it’s not as if Yelp is in the habit of beating its earnings estimates.
Stocks to Sell Soon #7: Shopify (SHOP)
The revenue growth Shopify Inc (NYSE:SHOP) has mustered over the past few years has been plenty impressive, ramping up from $23.7 million in 2012 to $282 million over the course of the past 12 months.
On the flip side, for as long as the company has been around, one would at least expect some hint that net profits were in the cards. Not only is the company still losing money each and every quarter, but the loss is getting bigger rather than smaller.
The 68% advance that SHOP shares have logged year-to-date says investors don’t care about the lack of profits — they’re more impressed with revenue growth. Now that the market is hitting a technical as well as a fundamental headwind, though, little things like profitability could suddenly become a factor again.
Stocks to Sell Soon #8: Penske Automotive Group (PAG)
It’s admittedly difficult to lump any automobile-related name into a list of stocks to sell. Last year was a record-breaking year for automobile sales in the United States, and 2016’s broad numbers haven’t looked too shabby either.
But Penske Automotive Group, Inc. (NYSE:PAG) is a name you’ll want to let go of sooner than later, as its 60% gain since early July is increasingly jeopardized.
It takes a close inspection of 2016’s auto sales trend to really see it, but the pace of vehicle purchases in the U.S. is slowing down. Even carmakers themselves are saying the industry reached a cyclical peak last year. More recently, Ford Motor Company (NYSE:F) lowered its full-year profit guidance, suggesting previous optimism for a solid 2016 wasn’t merited.
The slowdown puts all dealers in a questionable light, and especially the ones like Penske Automotive Group that have continued to soar on now-unsupported certainty that 2016 would be another banner year for vehicle sales.
Stocks to Sell Soon #9: Etsy (ETSY)
Etsy Inc (NASDAQ:ETSY) shares are up 60% year-to-date, mostly thanks to a 40% surge in early August on the heels of news that quarterly revenue jumped 39%, prompting a wave of upgrades. The company upped its guidance for the full year as well.
But that optimism is not only fully baked in now, it may have carried Etsy shares a bit too far, leaving them vulnerable to a setback in the near future.
The prod for a pullback may end up being a surprising amount of competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN), which recently has gotten into the handmade craft business and even more recently turned the heat up on that effort. Although Etsy seems to have smoothed things over with its vendors following a major payment glitch in July, many of them may be ready to make the switch to a more reliable venue. Even a modest defection could lead to a fiscal letdown in the near future.
Some ETSY investors are already starting to count on such a headwind.
Stocks to Sell Soon #10: Groupon (GRPN)
When Rich Williams took the helm as CEO of Groupon Inc (NASDAQ:GRPN) last November and unveiled his growth strategy for the company, the market mostly cheered. The stock has done well in the meantime, too, up 88% between then and now. Last quarter’s top line was up a bit too.
Problem: While there’s some semblance of revenue growth, so far it has been erratic, and the company has swung to sizable losses thanks to heavy promotional spending.
Worse, the market is starting to see it, questioning whether Groupon can even be viable. That is, Wall Street has no idea whether the company can grow the top line without increasing spending and moving deeper into the red.
Even worse than that, shareholders are starting to open their minds to those doubts, making GRPN especially vulnerable this September.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.