A few months ago, the Federal Reserve was talking about “transitory” inflation. The governors at the Fed meant that while inflation was rising swiftly, it wasn’t going to last.
But inflation kept rising at a brisk clip and the Fed started to be less sanguine about the transitory nature of inflation. It hedged by telling the markets it was going to likely start to wind down bond buying starting in 2022.
This month, the Fed has gone into full retreat and is talking now that it may start to push back starting next month.
In the meantime, investors are rotating out of the hot sectors during the sluggish pandemic days and gearing up by adding new sectors into their portfolios. There are some sectors and stocks that will be left out of this transition. And the seven growth stocks I have here are at the top of the list:
- Agnico Eagle Mines (NYSE:AEM)
- Fortune Brands Home & Security (NYSE:FBHS)
- Franco-Nevada (NYSE:FNV)
- MKS Instruments (NASDAQ:MKSI)
- Paccar Inc (NASDAQ:PCAR)
- Stanley Black & Decker (NYSE:SWK)
- StoneCo Ltd (NASDAQ:STNE)
Growth Stocks to Sell: Agnico Eagle Mines (AEM)
Back in the old days — before cryptocurrencies hit the scene that is — gold was the go-to investment when inflation started to hit the stock market. As the dollar weakened, gold, like other dollar denominated commodities, got more expensive.
And the gold miners are like upstream (exploration and production, or E&P) oil companies. They were leveraged to what they were bringing out of the ground. There’s a fixed cost to mining gold, so as the price rose, so did a miner’s margins.
Unfortunately, crypto has taken some of the allure away from gold. There’s a generational aspect to it as well. Many younger investors remember watching the world flip in 2008 and aren’t too interested in the time-honored investment styles and products of their parents.
Also, institutional gold holdings aren’t really as active as they used to be. That has put gold on the back of the shelf for many investors.
AEM is a big gold producer with a $14 billion market cap. It has been in business since 1957. But it remains unloved, even as inflation continues to hit new highs. AEM stock is down 30% in the past 12 months, so its decent PE and 2.4% dividend don’t make for much upside potential.
This stock has an F-rating in my Portfolio Grader.
Fortune Brands Home & Security (FBHS)
While the name doesn’t roll off the tongue, or conjure many images, its brands likely do: Master lock, Moen faucets, Simonton windows and Therma-Tru entry systems. It also does a lot of cabinet work.
FBHS is a victim of its own success at this point. Q2 numbers were great relative to its pandemic numbers from last year. But as inflation crashes in, mortgage rates will rise and all that money people were pouring into remodels and upgrades will begin to recede.
When it reported Q2 numbers FBHS even guided higher for the rest of the year. Now, that may come back to haunt this growth stock. FBHS stock is up 13% year to date, with a 1.1% dividend. Continuing its upward momentum will be tougher.
This stock has a D-rating in my Portfolio Grader.
Growth Stocks to Sell: Franco-Nevada (FNV)
FNV has a market cap that’s double the size of AEM, which makes it one of the big gold mining stocks in the market. And that means investors and institutions see it as a good gold stock to use as an inflation hedge. That’s why it has performed better than AEM.
But at the end of the day, FNV suffers from the same troubles as AEM. There are more alternative hedging instruments out there now. Gold is no longer the prime hedge of choice.
FNV stock is up 6.6% year-to-date but is treading water over the past 12 months. What’s more, it has a sub-1% dividend and is trading at current price-to-earnings ratio of 39x.
This stock has a D-rating in my Portfolio Grader.
MKS Instruments (MKSI)
Digital technology has found its way into every aspect of our lives. From defense, to healthcare, to manufacturing, to chipmaking — it’s all becoming smaller, faster and smarter.
MKSI is one of the companies that helps make that happen. It builds the machines, equipment and materials to help integrate tech into all manner of machines and equipment. It builds lidar and thermal imaging equipment for the military. It builds lithography and deposition equipment (and more) for chipmaking.
It underpins bioimaging, electron microscopy and spectrometry for life sciences. It helps in laser micromachining, LED manufacturing, as well as solar panel and display manufacturing.
It also just bought Atotech, a process materials chemical manufacturing company for $5 billion. The deal isn’t likely to go through until Q4. But bear in mind, MKSI has a market cap of around $8 billion, so that’s a big deal. Digesting that and dealing with all the supply chain and manufacturing issues out there is going to be difficult.
MKSI stock is down 2.6% year-to-date and may see more trouble in the quarters ahead.
This stock has a D-rating in my Portfolio Grader.
Growth Stocks to Sell: Paccar (PCAR)
Quick, name three tractor trailer truck companies. My guess is, Kenworth and Peterbuilt make the list. PCAR makes them both. It also makes the parts for them and other light, medium and heavy-duty trucks. And it has a leasing division for its trucks.
Add to all that, PCAR has been around since 1905. Its $30 billion market cap doesn’t put it in the league with EV upstarts or the Big 3, but it’s a good-sized business with a good pedigree that sells one of the core products in the supply chain.
However, the supply chain is seriously tangled right now. And that means shipping goods by truck isn’t exactly moving smoothly. That’s not good for business.
PCAR isn’t doomed, it’s just not a good growth stock choice until things clear up in 2022. The stock has been treading water year-to-date, but it’s no time call the bottom.
This stock has a D-rating in my Portfolio Grader.
Stanley Black & Decker (SWT)
When you think Stanley and Black & Decker you think solid U.S. tools and products that you use, your father used and likely your grandfather used. And some of those tools are still in your tool collection.
But do you think of healthcare and security? How about data centers and cybersecurity? Did you know that 90% of new cars and light trucks made in North America and Europe use SWT fasteners? Or that the automatic door was invented by SWT?
Well, all that said, those cars and light trucks are sitting on the assembly lines. And as inflation rolls in, all those tools may end up idle in a number of sectors, like housing.
SWT stock has a $28 billion market cap and has barely budged year-to-date. It has a decent 1.8% dividend and P/E ratio. But this isn’t the time to be diving in to this growth stock, or hanging on.
This stock has a D-rating in my Portfolio Grader.
Growth Stocks to Sell: StoneCo Ltd (STNE)
STNE is a fintech that operates in Brazil. It focuses on entrepreneurs and SMBs (small and midsized business). It offers payments solutions as well as other front and back office technologies to help small businesses operate more dynamically.
That all is very attractive. However, Brazil isn’t exactly a stable country economically. And right now, it’s still reeling from the pandemic and the resulting economic issues that remain unresolved.
Strong exports are key to its economy and that is very difficult now. Also, with inflation rising in developed markets, Brazil is going to get hit even harder, slowing down growth more.
This is all reflected in STNE stock. It has lost 54% year-to-date, yet it still has a P/E ratio of 64x. There are plenty of U.S. and global fintech stocks that are in much better shape than STNE.
This stock has a D-rating in my Portfolio Grader.
On the date of publication, Louis Navellier has no positions in the stocks in this article. Louis Navellier does not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (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.
Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.
