The latest Federal Open Market Committee (FOMC) minutes outlined delayed interest rate cuts. These are an effort to clamp down on inflation, noting “fewer cuts this year than previously thought.” This translates to elevated borrowing costs and increased living costs, a fertile ground for reduced profit margins. In such an economic climate, identifying stocks to sell becomes crucial. Certain sectors and companies are likely to be disproportionately affected by these macroeconomic pressures.
In other words, reduced disposable income trickles down to lower price-to-earnings ratios. For stock investors, this means separating the wheat from the chaff. And there is plenty of chaff on the stock market table.
Combined with weaker fundamentals, it is time to identify stocks to sell, ditching some at higher notes than others.
Cracker Barrel Old Country Store (CBRL)
Cracker Barrel Old Country Store (NASDAQ:CBRL), the iconic Southern country-themed restaurant chain, is undergoing a major rebranding shift. And it’s not in a way that is compatible with its perceived legacy. New Chief Executive Officer (CEO) Julie Felss Masino is leading the brand’s rustic charm toward a modern corporate blend.
This includes “LGBT Alliance” as well as “Diversity & Inclusion”. It puts the company in the middle of culture wars reminiscent of Anheuser-Busch’s Bud Light. However, Cracker Barrel doesn’t have hundreds of beer brands to make the temporary boycott a blip on the stock radar.
Restaurant expenditures are declining, and the company is facing significant operational challenges. Therefore, Cracker Barrel emerges as a prime candidate on the list of stocks to sell. Ending 2023, the company reported year-over-year (YOY) sales decline by 8.1% and a net income of $5.5 million. That’s a 68% decrease from the year-ago quarter of $17.1 million.
Also, the company drastically reduced quarterly dividend payouts from $1.30 to 25 cents. This was an attempt to aid the “strategic transformation”, further reducing shareholder value. Currently, the stock is at $47.15.
Dell Technologies (DELL)
Having expanded from being primarily a PC vendor into cloud solutions and artificial intelligence (AI) servers, Dell Technologies (NASDAQ:DELL) is a case of ending on a good note. In February’s fiscal Q4 of 2024 earnings, the company reported 11% YOY revenue decline to $22.3 billion. In the revenue breakup, the AI demand is noticeable.
Just as Dell’s Infrastructure Solutions Group (ISG) is up 10%, the Client Solutions Group (CSG) division is down 5%. Yet, both revenues are down YOY at 6% and 12%, respectively.
While DELL left the fiscal year at $8.7 billion cash flow, a forecasted hard landing ahead could leave the company in another PC sales cycle on the decline. In such a scenario, even DELL’s increased diversification wouldn’t prevent both individuals and businesses from cutting back on IT solutions and new hardware.
Ahead of such a cycle, DELL investors could exit on a high note, with shares having gained 114% value YTD. Presently priced at $170.66, DELL stock has hit its 52-week high, as compared to the $52-week low of $44.45 per share.
XPO (XPO)
It stands to reason that freight volume is a direct reflection of economic activity. Conversely, if that activity goes down, what happens to logistics companies like XPO (NASDAQ:XPO)?
Since the beginning of 2020, the company’s stock gained 300% in value, having rallied after the steep decline during the lockdown flight in March 2020. The XPO stock was further boosted by bifurcating its truck brokerage business into a separate company RXO (NYSE:RXO) in 2022.
This left XPO Logistics as a pure-play less-than-truckload (LTL) company, specializing in the shipment of small loads that do not require full truckloads. White this adds flexibility as LTL carriers can consolidate shipments from multiple customers, the company still has to deal with the fixed cost of personnel, trucks and terminals.
A major economic fluctuation would upset that equilibrium, returning XPO stock to its fair value. With a current price-to-earnings (P/E) ratio of 53.12, this suggests being highly overbought. XPO presents itself as a notable addition to any list of stocks to sell. YYD, XPO shares are up 27% at current $107.94 per share. It’s getting close to its 52-week high of $130.51 but far from its 52-week low of $46.55 per share.
On the date of publication, Shane Neagle 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.
