Let’s not sugarcoat it – the topic of stocks to sell sucks. Obviously, with any talks about removing securities from your portfolio, you’re dealing with other people’s money and their aspirations. On the other side of the table, many jobs are on the line if the target enterprise stumbles further.
But you got to ask yourself a tough question: would holding onto clearly struggling stocks to sell represent a better solution? In many if not most cases, the answer is no. Sure, some Cinderella stories may emerge but such rarities by default symbolize the exception, not the rule. A sports analogy may be helpful.
A few years back, the Los Angeles Angels had to make the difficult decision to cut the great Albert Pujols. As awesome of a player as Pujols was in his prime, age catches up to everyone. Given his declining performance and the rise of other players, no room existed for him on the roster.
Looking back in immediate hindsight, maybe mentioning the Angels is a bad example because they end up stinking no matter what they do. However, you get the point. As ugly as the topic is, stocks to sell is a necessity.
Virgin Galactic (SPCE)
Fundamentally, Virgin Galactic (NYSE:SPCE) carried much hope and I’d say reasonably so. According to McKinsey & Company, the underlying space economy reached a valuation of approximately $447 billion this year. By 2030, this tally could hit $1 trillion, maybe even more. So, during the early days of life as a publicly traded entity, SPCE appropriately skyrocketed.
Unfortunately, Virgin Galactic’s performance now sits in more terrestrial territory. Since the beginning of the year, SPCE suffered a loss of 47%. In the trailing one-year period, it dropped more than 64% of equity value.
To be fair, in recent sessions, options flow data – which exclusively targets big block trades – showed institutional investors placing bullish wagers. However, most of these bets expired ahead of Virgin Galactic’s upcoming Nov. 8 third-quarter earnings disclosure.
Overall, the poor financials – especially an unclear path to profitability – have strained investor sentiment. Subsequently, analysts peg SPCE a unanimous sell with a $1 target, implying 46% downside risk.
World Acceptance (WRLD)
Based in Greenville, South Carolina, World Acceptance (NASDAQ:WRLD) is a good business stuck in grievously unfortunate circumstances. Providing so-called worry-free loans and tax services, its personal loans and tax-prep offerings help many households. And to be sure, WRLD has performed exceptionally well on a year-to-date basis, returning 65% to shareholders. So, why label WRLD one of the stocks to sell?
For one thing, its more recent price action presents serious concerns. In the trailing half-year period, WRLD lost almost 2% of equity value. In the trailing month, it gave up more than 13%. Further, its Q3 print left question marks. In particular, revenue slipped to $117 million from $130.5 million in the year-ago quarter.
Moreover, both net-interest income and non-interest income incurred year-over-year revenue growth losses. Possibly, this framework indicates the stress that consumers are under. Also, fluctuations in implied volatility demonstrate that options traders anticipate the possibility of high tail risk with WRLD.
In turn, BMO Capital’s James Fotheringham pegs shares a “sell” with a $56 target, implying 48% downside risk.
Cano Health (CANO)
Another good company stuck in unfortunate circumstances, Cano Health (NYSE:CANO) has a heart of gold. Based in Miami, Florida, the company focuses on providing primary care to seniors, especially those from underserved communities. Sadly, though, the market views CANO as fool’s good. Since the January opener, it gave up nearly 91% of equity value.
In the past 52 weeks, CANO slipped more than 97%. Therefore, it would arguably be irresponsible to label it anything other than one of the stocks to sell. In fairness, management is throwing everything at the problem. As I reported on recently, the company initiated a 1-for-100 reverse split, primarily to stay listed in the New York Stock Exchange.
However, as I mentioned, market experts can see through such cynical efforts unless a legitimate turnaround argument exists. Here’s the challenge: the enterprise suffers from several severe red flags.
Ultimately, no analyst rates CANO a buy. Instead, it’s a consensus moderate sell. For context, the average 51-cent target implies catastrophic implosion but it’s from the pre-reverse-split period. Nevertheless, it remains one of the stocks to sell.
On the date of publication, Josh Enomoto 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.