So far this summer, the market has managed to defy the odds, making progress at a time of year it usually doesn’t on hopes that President Donald Trump will further implement his economic-growth agenda.
The S&P 500 Index, on average, is usually up 4.7% by late July, but this year it’s higher to the tune of 9.6%.
Yet, we’re about to enter an especially slow time of the year, leading up to one of only two months out of the twelve that generally dishes out a loss — September.
It’s conceivable that traders could use the recent rally as a profit-taking opportunity before the typical “September lull” strikes.
With that as the backdrop, here’s a closer look at five stocks to sell much sooner than later.
Either they’re alarmingly overbought, usually perform poorly in August, or both. In no certain order:
Stocks to Sell for August: AbbVie (ABBV)
No matter how you slice it, the next three months are apt to be ugly ones for shares of drugmaker AbbVie Inc (NYSE:ABBV).
Even in the average bullish year, ABBV peels back a couple of percentage points between the end of July and October’s low, and in an average year the stock gives up all of its 12% gain before hitting bottom in late October. (And if it’s a bearish year, yikes.)
There’s also the not-so-minor fact that AbbVie shares are starting August out technically overbought, up 20% for the year so far, earning it a spot on a list of stocks to sell sooner than later.
To that end, would-be profit-takers may have just gotten the excuse they needed to get the selling ball rolling. Earlier this week a jury concluded the company misrepresented its low-testosterone treatment AndroGel, and was financially liable for the mistake. This first verdict is just one of many potential ones like it, which could nag at ABBV for years to come.
Stocks to Sell for August: Disney (DIS)
One would think Walt Disney Co (NYSE:DIS) would be a huge summertime winner, in that consumers tend to invest in what they see and experience, and there’s nothing more summer-like than a vacation to one of Disney’s theme parks or resorts.
Oddly enough though, summer is generally a tough time of year for Disney. There aren’t a lot of major sports events to drive TV-watchers to its ESPN property, and people are more apt to be outside enjoying the weather than inside watching television or going to the movies; they’re not really making the investment connection.
The end result? DIS stock usually loses 4% of its value between the beginning of August and the end of September. At best, it breaks even for the two-month stretch.
Just don’t tarry too long. With the next installment in the “Star Wars” franchise due later this year along with another “Avengers” sequel, Disney is well-armed for a strong finish to the year. It should have no problem justifying its usual gain during Q4.
Stocks to Sell for August: Allegion PLC (NYSE:ALLE)
If you’ve never heard of Allegion PLC (NYSE:ALLE), don’t worry about it — most people haven’t. It’s a security hardware company, and with a market cap of only $7.5 billion it doesn’t turn a lot of heads.
Whatever the case, it’s on this list of stocks to sell for one crystal clear reason: it rarely (if ever) has a bullish July-September stretch. On average, ALLE loses 11% of its value between the beginning of August and its September low. This time around could be even worse, as it’s being dropped from a higher-than-usual height.
That said, this is another name you don’t want to bet against for too long. ALLE shares are priced at an affordable forward-looking P/E of 18.7, while earnings are projected to grow 11.6% this year and 13.7% next year. The rising tide of smart-home and home security demand is lifting all of these boats.
Stocks to Sell for August: Quest Diagnostics Inc (NYSE:DGX)
Quest Diagnostics Inc (NYSE:DGX) is a name that needs no introduction or explanation. Unfortunately, it’s also a name that doesn’t need to be bought until mid-September … after it’s worked out all of its kinks.
DGX shares typically lose about 5% of their value between early August and late September, and more than that if it’s running ahead of its usual pace like it is this year.
The clincher: Quest Diagnostics posted a respectable second-quarter earnings beat on Tuesday, and simultaneously upped its full-year outlook. Not only did the stock not move higher in response, it peeled back, sending a loud message that little is going to motivate the bulls here.
Stocks to Sell for August: J B Hunt Transport Services Inc (NASDAQ:JBHT)
Last but not least, add J B Hunt Transport Services Inc (NASDAQ:JBHT) to your list of stocks to sell soon. Not unlike Walt Disney’s summertime lull, there are cyclical forces in play here as well as psychological ones.
Demand for trucking doesn’t necessarily wane in the middle of the year, but it does tend to fall out of sight for most investors. If there aren’t any interested buyers, a stock’s not going to rally no matter how worthy it may be.
That said, J B Hunt posted second-quarter earnings last week making it clear it was facing a growing expense headwind — the kinds of costs that don’t abate quickly or easily. This reality check makes JBHT even more vulnerable to a near-term pullback than it usually is this time of year, and it usually gives up 8% of its value between the end of July and the end of September.
— James Brumley
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Source: Investor Place