Ever since the election, every financial site on the internet has been flooded with articles about which Trump stocks investors should buy. Now that a week has passed, some of that attention needs to be shifting to which Trump stocks traders should be selling. Many of these stocks have already made tremendous post-election gains even though Donald Trump has yet to set foot in the Oval Office.
A handful of shipping, healthcare and energy stocks have delivered years worth of returns in the first week since the election.
For a number of these stocks that have experienced reasonable one-week gains in the single-digits, a long-term Trump rally may be just getting started. However, for others, Trump trader exuberance coupled with evidence of short squeezes suggest these stocks may have gotten way ahead of themselves.
If investors believe everything Trump said on the campaign trail about international trade, tax cuts, deregulation and other issues, there is no question his policies could create significant long-term value for investors. However, traders should go ahead and sell these three Trump stocks that seem to have lost touch with reality.
Trump Stocks to Sell: DryShips Inc. (DRYS)
How could I start with any other stock? The post-election run-up in DryShips Inc. (NASDAQ:DRYS) has been nothing short of epic. Investors are lucky to find a single stock that will end up a 10-bagger in their lifetime. DRYS stock became a 10-bagger in less than a week.
Incredibly, in the first week following Trump’s election, DRYS stock surged more than 1,500%.
There’s certainly fundamental cause for excitement in the sector. The Baltic Dry Index, which measures the price of shipping raw materials by sea, has rising for eight consecutive days. It’s currently sitting at its highest point since mid-2015. The last time the Baltic Dry Index was this high, DRYS stock was trading at a reverse split-adjusted $4,500 per share. Today it trades at just around $70 per share.
If you are one of the lucky DryShips shareholders that has enjoyed the 1500%-plus gain in the past week, you’d have to be nuts not to take at least a large portion of your gains off the table. Trump may be good for business, but DRYS is still burdened with a massive debt load and seems to have narrowly avoided bankruptcy. At an increase of more than 1,500%, DRYS is now one Trumped-out stock in the near-term.
Trump Stocks to Sell: SAExploration Holdings, Inc. (SAEX)
This one is a bit of a head-scratcher. SAExploration Holdings, Inc. (NASDAQ:SAEX). Has surged 55% in the week following the election. The company provides seismic data acquisition services for oil companies. According to the company’s website, it specializes in “challenging environments and delicate ecosystems.”
Now, I certainly get that Trump is good for the U.S. oil and gas industry in some vague sense. The VanEck Vectors Oil Services ETF (NYSEARCA:OIH) is up more than 7% since the election. However, the U.S. oil market isn’t on hold because of politics. It’s on hold because of oil prices.
No matter how generous Trump will be to the oil industry, WTI Crude is still under $46 per barrel. That price doesn’t seem to suggest that oil companies like SAEX will be doing much drilling in “challenging environments” anytime soon.
Earlier this year, SAEX announced a 135-to-1 reverse stock split. The most likely explanation for the post-election move is that this Trump stock is simply enjoying a temporary short squeeze. Sell it while you can.
Trump Stocks to Sell: Insys Therapeutics Inc (INSY)
Insys Therapeutics Inc (NASDAQ:INSY) is one of the most peculiar Trump stocks out there. Since the election, INSY stock is up 21%. This move is presumably in response to marijuana legalization passing in eight of nine states.
However, as I have pointed out before, INSY donated a significant amount of money to the anti-legalization campaign in Arizona. INSY is not a marijuana stock. It is an opioid stock. In 2015, sales of Insys’ opioid painkiller Subsys hit $462 million. That represented the vast majority of Insys’ total business.
Marijuana-derived painkillers and marijuana itself are less-addictive alternatives to opioid drugs like Subsys. Marijuana legalization is a trend that threatens the long-term viability of opioid drugs. That threat seems to be why INSY was paying to get the Arizona marijuana initiative voted down.
There seems to be no good reason why INSY stock is up more than 20% since Trump was elected. If the market is confused about Insys’ true identity, now is the time to take the recent gains to the bank.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.