The stock market has been incredibly volatile in the past couple of months. Investors are anxious about a marked increase in Covid-19 cases due to the latest Delta variant. The variant has become a dominant strain even in countries with high vaccination rates. Moreover, the recent disappointing jobs data has also led to a slowdown in the market. Hence, this makes it an ideal time to think about stocks to sell from your portfolio.
The market jitters and the growing cases point to a similar pattern we witnessed last year when stocks tumbled to record volatility. It’s unclear whether the Delta variant will have the same impact on the stock market as its predecessors. Even if that’s not the case, there are other storm clouds.
Further stimulus may hit roadblocks, and the Federal Reserve states that it would be restricting its relaxed money policies. With that being said, let’s look at seven stocks to sell in August:
- Sundial Growers (NASDAQ:SNDL)
- Castor Maritime (NASDAQ:CTRM)
- Hertz (OTCMKTS:HTZZ)
- American Airlines (NASDAQ:AAL)
- Carnival Corporation (NYSE:CCL)
- Virgin Galactic (NYSE:SPCE)
- Canoo (NASDAQ:GOEV)
Stocks to Sell: Sundial Growers (SNDL)
Canadian marijuana producer Sundial Growers has had a torrid time during the pandemic, marked by a significant drop in sales and market share. Its year-over-year revenue has dropped by a massive 25%. The meme stock rally pushed its stock to new heights, allowing the company to amass over $1 billion in cash through secondary offerings. However, with no near-term catalysts, SNDL stock is a highly unattractive investment.
The company has ditched its wholesale channel to focus on retail sales. In doing so, it also acquired recreational cannabis company Inner Spirit. However, with the slowdown in the Canadian pot industry, it’s tough for Sundial to grow its sales substantially. A breakthrough in the U.S. could be a positive catalyst, but for the time being, it’s a rocky road ahead for the stock.
Castor Maritime (CTRM)
Marshall Islands-based shipping company Castor Maritime is another stock that has caught the attention of the retail trading crowd. The popularity of CTRM stock has led to a boom and bust in its price. It has taken advantage of the heightened interest in the stock by issuing new shares at a frantic pace. The company’s aggressive fleet expansion plans will continue resulting in its stock dilution for the foreseeable future.
Upon listing on the Nasdaq, the company had 240,000 shares outstanding. That number has now risen to an unbelievable 89.6 million. Moreover, its assets have grown by over 2,000%. This, in many ways, illuminates the company’s business model. Hence, shareholder dilution will continue to be a major factor that weighs down its stock price for the foreseeable future.
Stocks to Sell: Hertz (HTZZ)
Car rental company Hertz Global had its business essentially wiped away by the pandemic. It filed for chapter 11 bankruptcy in March and has been looking for sponsors to steer it out of the mess. However, the uncertainty in the macro-economic environment makes HTZGQ stock a worthless recovery play at this point.
Hertz has plans to exit its reorganization plan by this month. Its plan gives shareholders the ability to share $239 million in cash payment and common stock in a new business entity. Moreover, it also gives them a choice between additional Hertz stock shares at private equity prices or long-term warrants for more shares. However, even if the company emerges from bankruptcy, it will have an exceedingly tough time growing its top line amid the uncertain business environment.
American Airlines (AAL)’
American Airlines had a horrendous 2020 where it witnessed a massive 65% loss of revenue. However, judging from its impressive second-quarter results, the recovery is well and truly in motion. Regardless of the improvement in airline demand, the company faces multiple challenges, making AAL stock a subpar investment compared to its peers.
American recently released its second-quarter results, where revenue shot up by a massive 361% on a year-over-year basis. However, it reported a Non-GAAP loss per share of $1.69, which is a poor result compared to its peers. If you remove the effect of the payroll support grants, the net loss will widen by an even bigger margin. Moreover, it ended the quarter with a hefty $48 billion in debt and lease liabilities than just $14 billion in cash. Therefore with negative cash flows and the biggest debt load in the sector, AAL stock is a strong sell at this time.
Stocks to Sell: Carnival Corporation (CCL)
Leading cruiseliner Carnival Corporation had a forgettable 2020, with its ships docked for almost the entirety of the year. 2021 has been more of the same so far, but the business is finally seeing clearer seas and plans to resume 75% of its capacity by the fourth quarter. However, its mounting interest and debt burden will continue weighing in on CCL stock.
CCL is unlikely to return to full capacity before 2022. Moreover, there will probably be restrictions in spacing, cleaning and other expenses, which should drive up costs. Before the pandemic kicked in, it was $10 billion in debt, now almost three times in value. Moreover, the company is on the hook to have $400 million in quarterly interest expenses. Additionally, these numbers will continue to rise in line with its cash burn.
Virgin Galactic (SPCE)
Space tourism company Virgin Galactic recently completed its first civilian test flight. Moreover, it also received a full commercial launch license from the U.S. Federal Aviation Administration. Despite these positives, SPCE stock has sold off in the past few weeks. Investors have valid concerns about Virgin’s commercial opportunity.
It has plans to conduct 400 spaceflights per spaceport each year. However, with the limitations in its infrastructure, that goal is nothing but a distant dream. Its target market is small, and it has to spend $250,000 to $275,000 in replacing an engine after each flight. Therefore, it needs massive funds to continue building its infrastructure and scale its business effectively. In a nutshell, it will take years for the company to milk out a profit.
Stocks to Sell: Canoo (GOEV)
Electric vehicle company Canoo has big plans for the next five years. It plans to start the commercialization of its vehicles by 2022. Its business plan includes a unique subscription service, B2B commercial vehicles and a sport sedan. However, its massive quarterly cash burn of over $65 million, uncertain outlook and enormous capital requirements make GOEV stock a risky bet.
Canoo’s impressive manufacturing contract with Hyundai (OTCMKTS:HYMTF) recently got terminated. This was Canoo’s only revenue-generating contract. Hence, it will face significant cash flow issues unless it can roll out its vehicles soon, which isn’t happening. Moreover, there is significant competition in the sector, which further limits the stock’s attractiveness.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.