Recommending stocks to sell in a hot market is begging to be humbled. Even when a company disappoints investors, a “buy the dip” mentality can mean that any share-price decline will be short-lived. Nonetheless, here are five stocks we think are good candidates to jettison.
Many of the biggest players in the packaged-food industry continue to struggle amid heated competition and changing consumer tastes. Shares of General Mills (GIS (opens in new tab), $52) have been falling since mid 2016. The stock took another hit when the company, known for brands such as Cheerios, Betty Crocker and Yoplait, reported that sales in the quarter ended August 27 slid 4% from a year earlier. Goldman Sachs advises selling the stock, predicting continued earnings erosion “for the foreseeable future.”
Likewise, Goldman has a bleak outlook for J.M. Smucker (SJM (opens in new tab), $106), known for its iconic jellies but also home to brands that include Crisco, Folgers, Jif and Milk-Bone. Smucker is among the most vulnerable to industry pressures, including market resistance to price increases and more competition from grocers’ private-label brands, Goldman says. The brokerage sees flat sales and earnings for at least the next two years.
Consumer-products companies’ woes are bleeding into the advertisers that get paid to peddle their brands. Brokerage Morgan Stanley says revenue growth at major U.S. ad agencies has been decelerating over the past 18 months as consumer-goods companies rethink their marketing spending. The brokerage is particularly concerned about ad firm Omnicom Group (OMC (opens in new tab), $67). In October, fast-food king McDonald’s, an Omnicom client, said it was reviewing its ad-buying decisions. Morgan Stanley says Omnicom’s shares could fall to $52 if revenue growth shrinks further.
Stock to Sell: Dillard's
Department-store shareholders keep looking for reasons to hang on. Dillard’s (DDS (opens in new tab), $51), which operates 268 stores in 29 states, has seen its shares plunge 64% since April 2015. Yet even with sales at its stores still shrinking, management has been “complacent” about innovation, says Deutsche Bank. With the shares priced at about 17 times expected profit of $3.06 a share in the fiscal year ending January 2019, the brokerage says Dillard’s has the “least compelling” valuation in the industry.
Stock to Sell: Tesla
There’s no denying that Tesla’s technology is exciting. But production snafus have caused the company to repeatedly scale back founder Elon Musk’s plan to churn out 500,000 of the new mass-market Model 3 cars in 2018. Even so, analysts at stock research firm CFRA still are optimistic that Tesla’s losses will continue to shrink, and that the company can earn $5.50 a share in 2019. But as Tesla gets closer to profitability, investors should begin to value it more in line with other manufacturers. Even allowing for a very rich P/E of 50 on the 2019 profit estimate, CFRA says, the shares should be trading at $275 a year from now.
What’s the Difference Between Average and Actual Rate of Return?
An average rate of return can mask losses over time, so what investors really want to keep an eye on is the actual rate of return.
By Carlos Dias Jr., Wealth Adviser • Published
This Week in Cannabis Investing: Safe Banking Act in Focus During Lame-Duck Session
Marijuana advocates are hoping the outgoing Congress will take action on the Safe Banking Act, legislation that will improve cannabis companies' access to finance.
By Morgan Paxhia • Published
Kiplinger's Weekly Earnings Calendar (Nov. 28-Dec. 2)
stocks Check out our earnings calendar for the upcoming week.
By Karee Venema • Published
9 Best Commodity ETFs to Buy Now
ETFs These commodity ETFs offer investors exposure to the diverse asset class, which is a helpful hedge against inflation.
By Jeff Reeves • Published
What is a Recession? 10 Facts You Need to Know
Markets Fears of an economic downturn are once again on the rise, but what is a recession, exactly? We tackle this and other questions here.
By Dan Burrows • Published
Warren Buffett Stocks Ranked: The Berkshire Hathaway Portfolio
stocks The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Warren Buffett and his lieutenants.
By Dan Burrows • Published
What Happens When the Retirement Honeymoon Phase Is Over?
In the early days, all is fun and exciting, but after a while, it may seem to some like they’ve lost as much as they’ve gained. What then?
By T. Eric Reich, CIMA®, CFP®, CLU®, ChFC® • Published
5 Top-Rated Housing Stocks With Long-Term Growth Potential
stocks Housing stocks have struggled as a red-hot market cools, but these Buy-rated picks could be worth a closer look.
By Will Ashworth • Last updated
Interest Rates Likely to Continue Climbing
Economic Forecasts Fed Chair Jerome Powell hinted that future interest-rate hikes might be smaller, but rates may ultimately reach a point higher than Wall Street wanted to hear.
By David Payne • Published
10 Best Stocks You've Never Heard Of
stocks The market is peppered with undiscovered gems boasting stable fundamentals and cheap valuations. Here are 10 of the best stocks flying under the radar.
By Lisa Springer • Published