U.S. equities markets are delivering outstanding returns for investors this year. While the first quarter of 2023 was characterized by macroeconomic volatility, the second quarter ended in more resilient markets. The S&P 500 is nearly up 16% year-to-date, while the Nasdaq Composite has roared back from 2022 lows, largely due to the AI craze, returning investors almost 32% year-to-date. Nevertheless, even in a bull market like the one we’re currently in, stubbornness can create substantial losses for an investor’s portfolio. Whether because investors truly believe in an underperforming stock or have simply not properly attended to their portfolio, these kinds of losses must be avoided.
Below is a list of stocks investors should sell before they do more damage to their portfolios.
Tech Stocks to Sell: Agilysys (AGYS)
Agilysys (NASDAQ:AGYS) is a U.S. enterprise software stock I wrote about in early June, and the company has unfortunately remained a lackluster investment since then. To quickly recap, after pandemic restrictions were lifted in early 2021 and people started traveling again, Agilysys appeared as an easy bet for enterprise software investors. Since AGYS is a point-of-sales and property management software company geared toward the hospitality end-market, the post-pandemic rebound seemed obvious.
However, when the company’s fourth-quarter results for 2023 came out in mid-May, Agilysys beat analysts’ top-line and EPS expectations, but the company also announced it would be investing across all of its core businesses to drive future revenue growth, and equity investors were not happy. The stock dived 12% the following day, and since the beginning of the year, AGYS has lost approximately 12% of its value.
The problem is, even with a profitable business model, the company is still trading at an immense premium. AGYS’s forward-looking price-to-earnings (P/E) ratio is trading around 82.4x, while the forward-looking EV-to-EBITDA ratio is approximately 54.6x. That makes it one of the top tech stocks to sell.
EPAM Systems (EPAM)
EPAM Systems (NYSE:EPAM) is a technology services company providing digital platform engineering and software development services globally. The company’s engineering services include requirements analysis and platform selection, customization, cross-platform migration, implementation, and integration. EPAM provides what the company calls ‘infrastructure management services,’ including software development, testing, and maintenance of private and public digital infrastructure. Despite being a technology services provider and delivering lower margins (typically between 32-34%) when compared to flashy SaaS companies, EPAM has had solid top-line growth averaging 25+% over the past five years. The company is also net income positive.
The recent lackluster performance due to the devolving economic environment places EPAM on this -to-sell list. EPAM’s management team announced a downward revision of revenue guidance last month, implying a 2% decline YoY due to weak customer demand. The stock is down about 32% YTD, and if investors are still in, they should seriously contemplate selling before more money is lost.
Lumen Technologies (LUMN)
Lumen Technologies (NYSE:LUMN) is your all-encompassing U.S.-based telecommunications provider. Operating in both enterprise and consumer markets, Lumen offers a host of cloud and communication services, IT solutions, data center services, content delivery services, and managed security services. Delivering various products and services might sound good to certain investors, but it can leave the company cash-strapped by elevated costs and without a clear strategy. Lumen’s revenues have been in perpetual decline since 2018, and the company has also been incurring net losses. Perhaps investors still holding the stock are holding out for the company’s turnaround that centers on its promising Quantum business, which provides fiber optics to consumers and businesses. This business segment reported healthy momentum in Lumen’s Q1’2023 report.
Unfortunately, investors received an even clearer signal to dump the stock this year when the company reported both an expanded loss for Q4’2022 and dampened revenue growth in its Q1’2023 results. With LUMN down nearly 60% this year, investors who have not already cut their losses should consider making decisions to do so. This is one of the top to sell in my book.
On the date of publication, Tyrik Torres 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.