It’s the start of the new year and for many investors, a chance to seek out 2020’s potential big hits. However, successful investing is also about knowing which stocks to sell before they roll over. The reality is that all profits are paper profits until you take them to the bank.
Of course, discussing stocks to sell always riles folks up. And if you’re one of those people, before you send off a nastygram to my editor, consider this: Selling is just as vital a component within the investment markets as buying.
First, let’s discuss the obvious. Not everyone can bet on the same horse. If that happened, the reward potential for that bet would be severely limited. Someone must always be willing to adopt the opposing argument for markets to work.
Second, the act of selling often leads to flushing out of weak hands in a particular stock or market segment. An tradable asset almost never moves in a perfectly linear fashion. Sustainable rallies need healthy corrections to continue moving forward. Therefore, just because you see your favorite company on a list of stocks to sell doesn’t necessarily mean the end is near.
Third and finally, engaging stocks to sell helps discipline you as an investor. Remember, in a bankruptcy, the stockholder is typically the last in line to receive financial disbursements. That’s why you should never fall in love with your investments. The love will likely not be paid back if the smelly stuff hits the fan.
If you’re still with me, here are seven stocks to sell for January.
Nothing is more precious than eyesight. And the fine folks at Iveric (NASDAQ:ISEE) are hard at work developing treatments for rare retinal diseases. Indeed, the U.S. Food and Drug Administration has approved hardly any retinal disease therapies. Therefore, ISEE stock represents a potential breakthrough for unmet medical needs.
So, why am I putting Iveric on my list of stocks to sell? Although it might seem cold, please note that I have nothing against the company. Genuinely, I hope it does well. But the overriding reality is that ISEE stock is a speculative biotechnology name. For instance, Iveric didn’t generate any revenue over the last two years, meaning that it’s fiscally vulnerable.
Furthermore, ISEE stock has skyrocketed over the last two months, gaining over 775% since late October. Combined with the volatility in the speculative biotech space, the smart move is to sell now. Once shares have corrected, ISEE may be worth another look.
Stage Stores (SSI)
Stage Stores (NYSE:SSI) offers an interesting take on stocks to sell because I like the company’s business approach. Specializing in off-price but brand-name products, Stage Stores is essentially a discount retailer. However, it made that title official in September of last year, announcing that it’s going out of the department store business.
From now on, Stage Stores will be all about off-price retailing. As you might expect, the news dramatically lifted SSI stock.
But here’s the thing: Shares have jumped a little too high for many investors’ comfort (805% increase since the announcement). And that brings up the concern that most of the goods news is already priced into SSI stock.
Another aspect to consider is the timing. Since we’ve already passed the holiday shopping season, not much incentive exists for consumers. Plus, SSI stock competes against broader mainstream names like Ross Stores (NASDAQ:ROST) and TJX Companies (NYSE:TJX).
Contango Oil & Gas Company (MCF)
The energy market crisis that sparked in the middle of the last decade afflicted several players, particularly the smaller ones. Contango Oil & Gas Company (NYSEAMERICAN:MCF) is a prime example. Prior to the devastation, MCF stock was trading in the $30-$40 range. Today, shares are available for under $4.
With that much value shaved off the price, Contango doesn’t seem like a candidate for stocks to sell. But despite management’s best efforts to recover from the malaise, nothing has really changed expect the wildness of the equity. With MCF stock, you can be a hero one day and a zero the next.
That’s why I think it makes practical sense to sell MCF stock right now. Since Sept. 12, shares have nearly quadrupled in value. However, the financials — despite some improving metrics — are uncomfortably vulnerable.
FuelCell Energy (FCEL)
Although the aforementioned energy crisis most notably impacted traditional operators, many alternative energy companies likewise cratered. A dubious example of this is FuelCell Energy (NASDAQ:FCEL). In early January 2015, FCEL stock traded hands at over $200 a pop. Today, you can own shares for pennies on the dollar.
And I really do mean pennies on the dollar. At just over $2, FCEL stock took a 99% haircut over the last five years. Simply put, this is an unacceptable loss of investor confidence.
But I know what you’re thinking: With such utter devastation, does it make sense to place FuelCell in this list of stocks to sell? Technically, it does. Since Halloween, FCEL stock has ripped to an astonishing 825% profit. Undoubtedly, Wall Street’s enthusiasm for alternative energy companies helped at least partially support shares.
Still, FuelCell’s hydrogen-based power plants have a problem: They’re economically challenged. That’s because hydrogen, despite being the most plentiful element in the universe, is notoriously difficult to convert to usable energy.
Overall, I like what technology firm Cloudera (NASDAQ:CLDR) has to sell. As a cloud-based data platform and analytics specialist, CLDR stock is incredibly relevant. We all know that cloud computing is revolutionizing how businesses operate. But where the best players distinguish themselves is making the technology practical and usable without imposing unnecessary technical hardships.
Particularly, Cloudera’s data platform offers a compelling take as it allows end-users to enjoy the benefits of the cloud without radically changing on-premise infrastructure. Furthermore, this platform is scalable and flexible. So, why put CLDR stock in my list of stocks to sell?
Like the other names I’ve mentioned, CLDR stock is clouded by a combination of extreme momentum and vulnerable fundamentals. First, shares have jumped 119% in the second half of 2019 after tumbling badly in the first half. Because of the historical turbulence of shares, I’m more inclined to adopt the cautious approach.
Second, the fiscal picture leaves much to be desired. Although revenue growth is impressive, widening net income losses are not. Frankly, I think CLDR stock simply needs a breather.
Eros International (EROS)
At first glance, Indian film entertainment specialist Eros International (NYSE:EROS) appears like a company that you’d want to speculate on, not sell. Indeed, in the earlier part of the last decade, EROS stock moved substantially higher on India’s burgeoning film industry.
However, that occurred at a time when Bollywood was peaking in influence and popularity. Nowadays, it’s Hollywood that is threatening to upset its Indian counterpart. Why? Simply put, EROS stock may have a relevancy crisis on its hands.
As Western pop culture spreads globally, a rising international demographic has embraced Hollywood productions over traditional art forms. Thus, young Indian consumers are more likely to support American entertainment studios than their Indian counterparts. That doesn’t really augur well for EROS stock.
Plus, shares have screamed higher over the past three months. With weak financials supporting EROS, it’s time to consider moving on.
With the other names I’ve mentioned for stocks to sell, I’ve largely done so reluctantly. Many of these names aren’t bad companies but rather have moved too fast too soon for current prospective buyers. That said, I have no problem blasting Datasea (NASDAQ:DTSS). This company is complete crap.
According to its website, Datasea allegedly provides “comprehensive and optimized security solutions to clients.” The China-based firm then proceeds to list certifications from various Chinese government agencies. That’s all fine and well. But my problem — one among many — with DTSS stock is that the underlying firm has zero revenue.
So, all that sweet jazz about comprehensive and optimized security solutions sounds like a classic case of grade-A BS. Of course, what tickles some extreme contrarians is that DTSS stock sank into penny stock status last September before driving up to $2.45.
Perhaps I might be missing something here, but I doubt it. I can’t trust Datasea so I’m certainly not going to trust DTSS stock.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.