If you’re uneasy about what the market holds in store for blue-chip stocks in October, you’re not alone. September was “supposed to be” a lousy one for equities, burning off its overbought condition and setting the stage for the usual October low that starts the year-end rally.
We didn’t get the September tumble this year, though. The S&P 500 logged an unlikely 1.9% advance last month, leaving investors wondering how the market will respond to its unusual circumstances.
Whether October winds up a winner or a loser, these hot stocks are distinctly poised to lose ground this month. They may be blue-chip stocks, but they’re either dangerously overbought and ripe for a wave of profit-taking, or stuck in unstoppable downtrends.
Here’s a closer look at the top five of those stocks to sell this month.
Blue-Chip Stocks to Sell: Boeing Co (BA)
Click to Enlarge To anyone lucky enough to have bought shares of Boeing Co (NYSE:BA) sometime in the early part of this year, then congratulations. BA stock is up a whopping 67% year-to-date, with a big chunk of that gain materializing just within the past three months.
Now get out. While October is usually just a so-so month for Boeing shares, the sheer scope of this year’s gain leaves it very little room to go anywhere but down from here.
Don’t get the wrong idea. The company is doing fabulously, and confirmed as much with its second-quarter report posted in July … the one that catapulted BA stock to its heroic highs.
There’s just not much room or reason for an encore though, with a trailing and forward-looking price-earnings ratio near 23.
Blue-Chip Stocks to Sell: Caterpillar (CAT)
Much like Boeing, CAT stock was sent higher after a blowout second-quarter report and raised guidance for the rest of the year. Sales of $11.33 billion were not only up 9.6% year-over-year, but handily topped expectations of only $10.93 billion.
The good news, and even the positive guidance, is already baked into the stock’s price, and then some, with CAT stock up 36%-plus since the end of 2016.
There’s just not enough room left to run.
Blue-Chip Stocks to Sell: Twenty-First Century Fox Inc (FOX)
When things are good for Twenty-First Century Fox, they’re really good; when things are bad, they’re really bad. There’s just not a lot of in-between.
2017 is a bad year. While the outfit that owns properties like Fox Television, FX movie networks, Fox Sports, Sky, National Geographic and more is facing its normal, cyclical competitive pressure, Rupert Murdoch’s controlling ownership of Twenty-First Century Fox is also at risk.
While the Nathan Cummings Foundation has every right (and good reason) to question Murdoch’s level of voting power, it’s drama that can only hurt the company right now by distracting it.
There are also plenty of shareholders that prefer Murdoch to keep his commanding stake in the outfit.
Blue-Chip Stocks to Sell: Kinder Morgan Inc (KMI)
Even in bullish years it books an average loss of 4% for the month, and when things are bearish for KMI stock as they are right now, shares tend to lose more than 10% from October’s high to the end of the month. Then things get really bad.
In other words, Kinder Morgan has more than earned a spot on a list of stocks to sell sooner than later.
Throw in the fact that its Trans Mountain Pipeline plans have once again run into a legal headwind, it makes sense to see the stock testing waters of lower lows.
Blue-Chip Stocks to Sell: Philip Morris (PM)
Click to Enlarge Last but not least, though October is usually a good month for Philip Morris International Inc. (NYSE:PM) — even in a bad year — 2017’s October could prove to be a particularly tough one for PM stock.
In short, Philip Morris doesn’t have a rock-solid future in a smoke-free world. The recent management shakeup was initially applauded by the market, but with time to think about traders are starting to see it as a sign that the company knows it’s on the defensive.
Fanning the bearish flames is a distinct possibility that Philip Morris shares are quickly becoming a victim of their own success. After rallying 35% between the end of last year and June of this year, the profit-takers have started to come out of the woodwork.
Shares lost 6% of their value last month, but with plenty of bearish momentum behind it, things are apt to get worse before they get better.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.