Now that we’ve exited the best January for the stock market since 1987, as well as one of busiest earnings weeks for the Dow Jones Industrial Average and the S&P 500, it’s time to take a breath, see where we stand and see what stocks to buy — and what stocks to sell.
From one of the worst Decembers in recent memory to a red-hot January, it’s pretty obvious that the markets are still looking for their footing. People are worried about the trade war with China and a mixed bag of earnings … and then the Federal Reserve announced a go-slow approach to raising interest rates.
The latter was the recent spark that set the market on fire. And it shows the desperation for some clear news in the markets. That kind of statement in another market would have sent stocks reeling, since it portends economic weakness ahead.
But that’s not where we are right now.
The one thing that is clear is that this isn’t a market for wimps — and by that I’m talking about wimpy stocks. The 10 F-rated stocks to sell listed here are all Portfolio Grader flunkies and need to be weeded out of your portfolio now.
F-Rated Stocks to Sell: Tata Motors (TTM)
Tata Motors (NYSE:TTM) has been an iconic brand in India since 1945, with deep roots to much of the nation’s infrastructure needs, not unlike the relationship between U.S. automakers and U.S. defense and infrastructure.
The Tata family has had many spinoffs over time, and TTM stock now has looked beyond India for growth. One of its plans to reach the Western markets was to acquire some already-established brands. It bought Jaguar and Land Rover.
This strategy has worked, but only up to a point. It is still beholden to its domestic and regional sales, and they have been weak since last summer. Increasing competition from U.S., European and Chinese automakers will make its rebound even tougher. It may be a play on electric vehicles in coming years, but launching in a big market outside India is going to be tough and isn’t coming while its current profits are scarce.
Pampa Energia (PAM)
Pampa Energia (NYSE:PAM) is a diversified energy company in Argentina that got its start in 1945.
The trouble with PAM isn’t the company as much as the country in which it operates. Argentina has constant problems with its economy. For example, in late October it received another loan from the International Monetary Fund for $56 billion. It went to the IMF as lender of last resort since it has a history of not paying back loans it has taken from other countries.
When you’re the largest power company in the country and your economy is unsteady, it makes your base less reliable.
Even after a solid January, the stock remains lower by 49% in the past 12 months. This is not a buying opportunity.
General Electric (GE)
General Electric (NYSE:GE) doesn’t need much introduction. It has been around since its founding by none other than Thomas Edison in 1892.
But in that 120 years, we have seen GE transform into a global conglomerate with diverse divisions: from consumer durables to nuclear reactors to locomotives. And over those decades, leadership has taken it down some box canyons, but it always relied on the strength of its diversified divisions to bail it out.
Unfortunately, it chose to ignore rather than deal with some of its troubles. And as critics started to ask about certain divisions’ value, it was easier to talk about the future, or a division on the move. But that shell game is over.
GE is not the company it once was. In late 2017, it cut its dividend in half, and sent shock waves around the investing community. One of the most rock-solid companies was floundering. And while it’s working on improving, it’s going to take a long time for it to truly find its way out.
Halcon Resources (HK)
Halcon Resources (NYSE:HK) is off 79% in the past 12 months.
Now, given that it’s in the exploration and production (E&P) business in various U.S. shales, you may figure that this is an opportunity to pick up a bargain E&P player and ride it back. If the U.S. economy is continuing its rise, and global demand remains steady to slowly growing, then HK should come back big.
Not so fast. First of all, 2018 was a solid year for energy companies and the fact that HK stock lost more than three-quarters of its value in that year doesn’t bode well. Also, why buy an E&P that’s down on its luck when there are so many others that are doing well?
There’s no reason keep this obvious stock to sell when there are so many winners in the sector.
Visteon Corp (VC)
Visteon Corp (NASDAQ:VC) has been a part of the U.S. auto industry for quite a while. It specializes in providing automakers, primarily the Big Three, with instrument clusters, information displays, infotainment systems, audio systems and other telematics.
With a $2 billion market cap, it has a decent position and reputation in the industry. However, the new auto boom in the U.S. is fading as car companies have announced significant layoffs of their workforces. Part of that is the demise of sedan.
Even after scoring a 27% rally in January, the stock is still off 40% in the past 12 months. This company is volatile and doesn’t have much to save it from the transitional nature of the consumer auto market right now.
Thor Industries (THO)
Thor Industries (NYSE:THO) sells recreational vehicles. It owns the most iconic U.S. brand out there — Airstream. It also operates the brands Heartland, Keystone, K-Z and Thor Motor Coach, in both the towable and motorized markets.
Last year it ran into problems with sales as well as margins. Higher metals prices and higher wages ate into margins, and higher interest rates ate into sales. The company thinks the same challenges await it in the first half of 2019.
It also spent nearly $2.5 billion for a German RV maker last year. That may make some strategic sense in cross marketing vehicles, but Europe’s growth is slowing, with Italy already in recession. This year may be a bumpy ride for THO.
Perrigo (NYSE:PRGO) is an Ireland-based healthcare firm that sells over-the-counter products and prescription drugs.
This sector is already under some pressure as generics move into the markets and the U.S. healthcare system — the most lucrative market in the world — is still in limbo.
But in December, PRGO announced that Ireland had issued a tax charge against PRGO for nearly $2 billion, or about a third of its current market cap. At the time of the charge, it was about a quarter of its market cap.
The stock sold off nearly 40%.
With that kind of albatross — and likely the ensuing law suits from investors — this isn’t a good time to be entering or holding this one. It may work out, it may not, but it looks like this is a stock to sell for now.
Glatfelter (NYSE:GLT) produces specialty paper and engineered products. It has been around since its founding in 1864.
The thing is, paper is not exactly the business it was a decade or two ago. GLT has some traditional business sectors and it also makes the woven materials that go into diapers, as well as products that go into food packaging and industrial packaging.
Also, paper prices are rising, which means margins are shrinking, unless those costs are passed on to its customers.
The stock is off 45% in the past year, and that’s after a 28% rally in January. Just the sheer volatility of such a conservative stock is not a good harbinger of things to come.
Hain Celestial Group (HAIN)
Hain Celestial Group (NASDAQ:HAIN) is one of the largest organic and health food companies in the U.S. Even now, it sports a market cap of nearly $2 billion. It owns the brands Celestial Seasonings, Earth’s Best, Ella’s Kitchen, Terra, Garden of Eatin, Sensible Portions and Health Valley.
It was going gangbusters a couple years ago, but its acquisition-fueled growth slowed. There was still optimism about the space though, and it was still a quality play in a sector that had only a handful of choices.
But then it was announced that the SEC was looking into the way HAIN booked revenue, which delayed it quarterly returns as the company had to go back and adjust.
Needless to say, it was one of the biggest losers in the S&P 500 in 2018. It’s likely 2019 won’t be the year of the turnaround. This is a stock to sell.
Venator Materials (VNTR)
Venator Materials (NYSE:VNTR) is in the titanium dioxide business (TiO2). And while you may not have heard of it specifically, TiO2 is everywhere from powered donuts to packaging materials to paints.
Basically it’s a white pigment that makes whites look whiter, last longer and remain stable. It’s also a very competitive industry that is very cyclical. When the business cycle is in an upswing, TiO2 firms do well. When the economy contracts, TiO2 feels it.
In the past 12 months VNTR stock has gone from overweight with analysts to neutral. This stock to sell has lost 78% over those 12 months, and that’s after an 18% rebound in January.
Trade wars and slow economies around the world aren’t pointing to a strong start to 2019, so VNTR isn’t in the bargain bin. It’s still just in the bin.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.