When the calendar nears May, investors start the annual tradition of filing through their portfolio, looking for stocks to sell. But for a minute there, it seemed like the market might be heating up heading into the fifth month of the year. The Nasdaq Composite surged past the 6,000 mark for the first time ever on Tuesday — hitting new highs for the first time since March — capping an epic gap move higher.
However, Wednesday didn’t see much follow through, not even after President Donald Trump unveiled a tax plan that would slash rates for individuals and businesses alike. The market’s rally now looks vulnerable to a reversal.
Many of the factors that have kept the rest of the market in stasis over the past two months remain in play: Weak “hard” economic data, geopolitical tension, a lack of legislative progress by President Trump and renewed weakness in the energy complex as crude oil is hit by oversupply fears.
Moreover, the last time stocks surged above their upper Bollinger Band — as they did on Tuesday — was last August, which marked a medium-term top for the market. Additionally, breadth remains extremely narrow, with just a handful of big-tech stocks driving the overall market averages higher here.
As the dreaded “Sell in May and go away” period of the year approaches, I don’t suggest you necessarily follow that advice verbatim. But you should consider lightening some positions ahead of another move to the downside.
With this in mind, here are five stocks to sell in May.
Stocks to Sell in May: Advanced Micro Devices (AMD)
Advanced Micro Devices, Inc. (NASDAQ:AMD) shares more than doubled from their November low into the high set in late February thanks to the launch of its eagerly awaited Ryzen processor architecture. Demand has been strong, as the company finally has a competitive offering to take on rival Intel Corporation (NASDAQ:INTC).
However, Goldman Analyst Toshiya Hari threw cold water on the bulls earlier this month on valuation concerns, warnings of a 20% downside risk.
And there’s the problem that hardware, regardless of AMD’s numerous advances and improved position within the space, will remain cheap. For all its progress, AMD still is expected to lose 3 cents per share in the current quarter, which the company will report May 1 after the close. That comes despite an expected 18.3% rise in revenues to $984.4 million.
AMD could be one of the quickest stocks to sell off in May. Investors are sitting on triple-digit gains in a very short time, and they’ll want to lock those returns in if it looks like a vanishing act is nigh.
Stocks to Sell in May: General Electric (GE)
General Electric Company (NYSE:GE) shares haven’t looked “good” in a long time, but they look particularly vulnerable to a downside move out of a year-to-date consolidation range, continuing to languish below its 200-day moving average.
The stock was downgraded to “Neutral” from “Buy” by analysts at Bank of America Merrill Lynch earlier this week in the wake of last week’s earnings report on concerns expectations are too high and end-user demand — particularly in gas-fed energy production infrastructure — could weigh on results going forward. Cash flow came in well below expectations as well.
But what’s really troubling about GE is the fact that, under Jeff Immelt, seems unable to deliver on the most modest of promises.
General Electric doesn’t have another chance to win back investors’ hearts until its next earnings report all the way in mid-July. That’s a lot of time for the bad taste of Q1 earnings to linger. Analysts are looking for earnings of 26 cents per share on revenues of $29.3 billion.
Stocks to Sell in May: Verizon (VZ)
Verizon Communications Inc. (NYSE:VZ) got an “A” for effort, but a “D” for the actual results of its fiscal first quarter.
VZ shares were slammed unceremoniously out of a four-month trading range earlier this week. That’s because the telecom reported not only disappointing numbers on the top and bottom lines — including revenues that declined 7.3% from the prior year — but the company’s first-ever drop in wireless subscribers.
Competition from lower-cost carriers such as T-Mobile US Inc (NASDAQ:TMUS) and Sprint Corp (NYSE:S) is increasing as network quality — once Verizon’s main claim to fame — becomes increasingly equalized. TMUS, in fact, reported a boffo quarter just a couple days ago, boasting a gain of 914,000 net postpaid subscribers.
Verizon still has its substantial 4.9%, so long-term buy-and-holders will likely sit on VZ shares until the end of time. But those looking to raise funds for other, more growthy buys should certainly consider bailing on Verizon … or you could look to trade bearishly via the options market.
Verizon’s next report comes July 27 before the bell, when analysts will be looking for earnings of 97 cents per share on revenues of $29.97 billion.
Stocks to Sell in May: eBay (EBAY)
EBay Inc (NASDAQ:EBAY) shares, which had posted a nice 10%-plus rally off of its December low, broke down and out of its multi-month uptrend pattern by slicing below their 50-day moving average earlier this month in response to cautious forward guidance by management. This overshadowed a slim earnings beat.
Another concern was a drop in profitability, as operating margins fell to 30% from 33.4% last year.
EBay’s problems have been mounting long before the earnings report, however. For instance, StubHub search interest was weak to start the year, and Piper Jaffray’s semi-annual “Taking Stock With Teens” surveys show a notable decline in eBay’s popularity among teenage shoppers.
For now, EBAY seems likely to fade into the summer. It might be able to bounce back in mid-July, when the company reports earnings next. Analysts want to see 45 cents per share in profits on revenues of $2.3 billion.
Stocks to Sell in May: Procter & Gamble (PG)
Lastly, Procter & Gamble Co (NYSE:PG) shares — typically supposed to be a source of strength and stability — are breaking lower on Wednesday after reporting quarterly results before the bell.
Earnings came in 2 cents ahead of estimates, but revenues fell 1% from last year to come in under analyst estimates. Forward revenue guidance was also lowered slightly, suggesting the company continues to face organic growth challenges.
That’s a problem considering that was the purpose of Procter & Gamble’s “right-sizing” over the past few years, getting smaller, divesting numerous businesses and reorganizing itself in an effort to become more agile. But that’s not what we’re seeing. Shareholders should be frustrated, too — although PG stock is up considerably from its 2015 valley, shares still are flat from their 2014 highs, and now it looks like they’re ready to give up the $90 mark yet again.
After a near 14% rally out of its December low, P&G shares look vulnerable to a touch of the 200-day moving average at the very least.