5 Stocks to Sell or Avoid for 2021
In investing, pruning is prudent. Here are five stocks to sell (or avoid if you're looking for new holdings) as the calendar flips to 2021.
Warren Buffett, champion of buy-and-hold investing, has famously said that "our favorite holding period is forever." But quite often, reality gets in the way. Sometimes a stock's long-term outlook takes a turn for the worse, and the best thing you can do is collect your profits (or take your lumps) and move on.
Thus, while you're exploring stocks to buy as we approach the new year, you also should be examining your current portfolio for stocks to sell.
Even the best gardens need pruning, after all.
There are several reasons to sell a stock, and they're not always a condemnation of the company itself. For instance, if a position grows from 10% of your portfolio to 20%, you might want to pare down that position as part of a normal rebalancing. And at times, certain market factors beyond a company's control (think COVID) can make shoddy investments of even best-in-class firms.
In a remarkably resilient market, Sell recommendations can be dicey. Still, here are five stocks to sell or avoid as we turn the calendar to 2021. (And if you're looking for somewhere to put that money raised to work, you can check out our 21 best stocks to buy for 2021.)
Data is as of Dec. 8. Stocks listed in alphabetical order. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
- Market value: $6.0 billion
- Dividend yield: 0.2%
Harley-Davidson (HOG, $39.36) makes beautiful, high-quality machines, but its baby-boomer customers are "getting too old to ride motorcycles," says Mitch Rubin, manager of RiverPark Long/Short Opportunity Fund (RLSFX).
The pricey bikes are hardly essential purchases, a handicap during uncertain economic times. And a glut of used Hogs on the market is hurting demand for new bikes.
Jochen Zeitz, who was installed as CEO in March 2020, plans to cut costs and streamline the business, Rubin says. But that won't increase the pool of Harley riders, which is crucial to reviving sales long term.
Rubin expects shares to fall to the mid-$20s in the coming year. That's quite a bit more bearish than the broader analyst community – only a few pros explicitly put HOG among their stocks to sell for 2021 – but their outlook isn't favorable, either. The 13 analysts tracked by S&P Global Market Intelligence who follow Harley-Davidson have an average price target of $37.69, implying single-digit declines over the next 12 months.
National Oilwell Varco
- Market value: $5.6 billion
- Dividend yield: N/A
In theory, National Oilwell Varco (NOV, $14.35), which makes components and tools used in oil and gas drilling and production, should benefit from producers looking to increase efficiencies during tough times.
But despite better-than-expected results for the most recent quarter, "positive traction will be hard to maintain over the next 12 months," according to CFRA.
At the end of October, the firm lowered its 12-month target price for National Oilwell shares from $13 to $7 and slapped a Sell rating on the stock.
A few other analysts have NOV among their stocks to sell right now, and the overall analyst consensus is a Hold rating. Worse, an average price target of $13.45 implies the Street expects National Oilwell's shares to decline by mid-single digits in 2021.
You can find much more promising energy stocks to ride a potential economic comeback in 2021.
- Market value: $6.3 billion
- Dividend yield: 1.4%
Back in the day, ratings from Nielsen Holdings (NLSN, $17.52) were vital to television programming and advertising decisions. But TV ad sales are in decline and fewer people are watching. Instead, they stream digital content on mobile devices.
Streaming companies don't need Nielsen; they can track viewing trends on their own.
Sales and earnings have been flat in recent years. Meanwhile, Nielsen is loaded with $8.1 billion of long-term debt and $3.4 billion in short-term liabilities; its cash hoard is $2.25 billion.
"It has way too much debt and little possibility of growth," says RiverPark's Rubin.
Simon Property Group
- Market value: $29.6 billion
- Dividend yield: 5.8%
Simon Property Group (SPG, $90.11), long a best-in-class shopping center real estate investment trust (REIT), is on the wrong side of current trends.
Already beset with store closures in its malls, Simon was wrecked by the pandemic. And it has made some questionable moves recently, such as agreeing in early 2020 to buy luxury mall owner Taubman Centers. By June, it wanted out. The two then spent months in court before finally agreeing to revise the terms of the merger, with SPG now paying $43 per share rather than the original $52.50.
That and vaccine optimism boosted shares by roughly 45% between the start of November and early December. However, there's little additional upside to grab, according to S&P Global Market Intelligence-polled analysts, who on average see shares reaching $92.11 over the next 12 months.
One big risk: Post-COVID shopping behavior may accelerate store closures, say CFRA analysts, who rate the stock a Sell.
- Market value: $9.8 billion
- Dividend yield: 2.7%
Snap-on (SNA, $180.92) makes and distributes hand tools, storage units and equipment for professional mechanics. Rising debt among the company's franchisees is constraining growth, according to UBS Securities, which rates the stock a Sell.
Snap-on extends credit to franchisees and to the technicians who use the company's tools and equipment. Tool sales have largely moved sideways since 2015, says UBS, but the firm's financing portfolio has ballooned 36%.
The brokerage recently lowered its 12-month price target for the shares to $141, more than 20% below current prices. Three analysts have SNA among their stocks to sell, versus four Holds and three Buys, according to S&P Global Market Intelligence. An average price target of $163.75 per share is even more disconcerting.