3 Stocks to Sell Ahead of the Coming VIX Spike
Uncertainty is something that we can evaluate in the financial markets in general. There are many tools and indicators that we can monitor to visualize and quantify uncertainty at a general level in the markets, but there is something that is completely individual and that is risk aversion. It is true that we cannot visualize the future to know what will happen in the financial markets. However, in a possible VIX spike, there are stocks to sell that are more vulnerable than others.
I bring you three stocks to sell that you should ditch in a scenario like that. Let’s briefly analyze each of them, remember to make your own decision based on your analysis and risk aversion.
Expeditors International of Washington (EXPD)
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Expeditors International of Washington (NASDAQ:EXPD) is a company primarily engaged in international freight forwarding and logistics. Its primary function is to facilitate the efficient movement of products and cargo for its customers worldwide. This includes the management of air, sea and land shipments. It also includes the coordination of customs and related formalities.
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The reason it is considered one of our stocks to sell ahead of a possible increase in the volatility index (VIX) is due to its recent financial performance. According to their financial results for the second quarter of 2023, compared to the same period in 2022, they have experienced a marked decline in several key metrics.
Diluted earnings attributable to shareholders per share (EPS) decreased 43% to $1.30 per share.
Earnings attributable to shareholders decreased by 48% to $197 million. Operating income decreased by 51% to $248 million. Total revenue decreased by 51% to $2.2 billion.
In addition, there was a significant decrease in airfreight tonnage volume and ocean container volume, with declines of 15% and 13%, respectively. This decline in cargo volumes suggests weaker demand for EXPD’s logistics services, which could indicate difficulties in its industry.
In relation to the VIX, an increase in market volatility could negatively affect EXPD and other stocks, as economic uncertainty often reduces investor confidence and can lead to massive stock sell-offs. Given the deterioration in their financial performance and the decline in demand for their services, they may be particularly vulnerable to any increase in market volatility.
Allison Transmission (ALSN)
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Allison Transmission Holdings (NYSE:ALSN) is a company that manufactures automatic transmissions for commercial and military vehicles. Simply put, they make the part that allows vehicles to shift gears automatically, which is essential in heavy-duty applications.
Now, some experts believe that this is a stock that is very sensitive to rises in the VIX.
However, Allison Transmission “appears” to be in a strong position based on the financial results provided. In the second quarter of 2023, they reported record quarterly net sales of $783 million, an 18% increase throughout the same period last year. In addition, they achieved net income of $175 million, representing 22% of net sales, a substantial 43% increase throughout the prior year. Diluted earnings per share also showed impressive growth of 52% compared to the same period last year, reaching $1.92.
The company’s CEO, David S. Graziosi, highlighted the company’s strong performance, especially in terms of sales growth and improved gross margin. In addition, they are committed to returning value to shareholders through dividends and share repurchases. They even raised their 2023 full-year net sales guidance to $3 billion, suggesting confidence in their future performance.
Still, if you hold this stock in your portfolio, it is worth considering evaluating the rationale behind your decision to own it, but in the face of a possible rise in the VIX, it is advisable to be cautious.
Rowe Price Group (TROW)
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Rowe Price Group (NASDAQ:TROW) is a firm dedicated to helping individuals and institutions manage their investments and plan for retirement.
Their goal is for individuals to effectively achieve their financial goals. Lately, however, the question has arisen as to whether it is wise to sell its stock ahead of a possible increase in the volatility index (VIX), which indicates uncertainty in the markets.
The latest news reveals a positive performance for them. They have beaten expectations by reporting second quarter adjusted earnings per share of $2.02, beating estimates of $1.73.
In addition, they have identified cost savings that could slow expense growth going forward, and their net income increased 6.4% in the second quarter to $1.61 billion, up from $1.51 billion a year earlier. This seems to indicate good near-term performance.
However, it is important to remember that short-term performance does not guarantee long-term stability, especially for a company whose performance is tied to market swings, such as T. Rowe Price. The concern is that if the VIX rises, which usually indicates market turbulence, it could negatively affect the company’s stock.
As of this writing, Gabriel Osorio-Mazzilli 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.
Gabriel Osorio is a former Goldman Sachs and Citigroup employee. He possesses discipline in bottom-up value investing and volatility-based long/short equities trading.
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