3 Struggling Stocks to Sell Before They Drag You Down
Let’s face reality – the very concept of struggling stocks to sell is an ugly one. In many ways, the loyalty to the enterprises in our portfolio is understandable. It’s not just about the money put in, though that obviously plays the biggest factor. Rather, cutting shares out is akin to abandoning your favorite sports teams because they had a rough season.
As Americans, we appreciate the dedication that fans have for their teams. For example, it took 108 years for the Chicago Cubs to finally win the World Series following their previous victory. It’s not hard to understand the romanticism behind such patience. However, you can’t afford to wait more than a century for your portfolio to go right side up.
Sometimes, you gotta make difficult decisions. With multiple challenges ahead, these are the struggling stocks to sell.
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Re/Max (RMAX)
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On paper, Re/Max (NYSE:RMAX) seems an excellent idea for a bounce-back candidate. In the past 52 weeks, RMAX suffered a loss of nearly 55% of equity value. However, since November, the volatility has died down. Further, it appears RMAX is printing a series of higher lows. As well, RMAX’s point-and-figure (P&F) chart prints a low pole reversal pattern. Basically, the supply making the prices fall has been absorbed. Now, shares are ready to fly.
Fundamentally, though, it’s difficult to see RMAX recovering. Sure, in theory, the company benefits from a booming jobs market and economy. Also, the Federal Reserve has hinted at lower interest rates, which should make affordability better. However, more people having more jobs would put the pressure on the pricing side. So, in a way, it’s robbing Peter to pay Paul – and the real estate market is in no mood to give away free arbitrage.
Also, I don’t like the lack of speculative fire. RMAX’s short interest and short interest ratio combo is unremarkable. Further, the gamma exposure for RMAX is zero dollars for every 1% move – again, unremarkable. Lastly, analysts rate shares a consensus moderate sell. So, it leads to a logical conclusion: it’s one of the struggling stocks to sell.
Mullen Automotive (MULN)
Source: Ringo Chiu / Shutterstock.com
It’s hard to understand why so many retail investors continue to pour into embattled electric vehicle manufacturer Mullen Automotive (NASDAQ:MULN). Sure, I get that the company is throwing everything and the kitchen sink in a bid to boost momentum. I’ve covered many of these stories. Unfortunately, none of these news items have sparked a sustainable rise in the share price.
Just look at the chart. In the past 52 weeks, data from Google Finance reveals that it lost 99.93% of its equity value. I’ll share a quick story. Back in August last year, I shared my concern – via Barchart – that Mullen could implode. Immediately following publication, a reader kindly offered to educate me on MULN, presumably to share the bullish narrative.
Here’s the thing – MULN lost around 93% of value since that article went live.
Now, I get that speculators anticipate a short squeeze or perhaps a gamma squeeze in the options market. I just don’t see evidence for that. Yes, MULN enjoys a high short interest of 16.87% of its float. However, the short-interest ratio sits at only 1.65 days to cover, a nothing-burger. As for the gamma squeeze, the market maker’s gamma exposure is only $10,000 per every 1% move in the underlying security. Until proven otherwise, it’s one of the struggling stocks to sell.
Canoo (GOEV)
Source: Shutterstock
Another struggling EV outfit, Canoo (NASDAQ:GOEV) is quite similar to Mullen in that both enterprises enjoy robust retail investor support. Chances are, if you are bearish on GOEV, you’re going to hear about it. Granted, I understand the passion. However, we also must look at reality. Since the start of the year, GOEV slipped a bit more than 26%. In the trailing one-year period, GOEV gave up almost 85% of equity value.
By any other gauge, it’s one of the struggling stocks to sell. However, Canoo presents a risk factor to the bears in the form of Dan Ives. Remarkably, the respected Wedbush analyst views Canoo as a disruptive player in the delivery van market. Given its spacious vehicles, it’s easy to see why Canoo as a platform has potential. But does the same sentiment apply to GOEV as an investment?
Fans may point to the short-squeeze potential and there’s something there. Fintel points out that GOEV’s short interest stands at 15.08% of its float. However, the short interest ratio sits at 1.64 days to cover. Frankly, I don’t think that’s enough pressure because the bears can exit their position in less than two sessions.
On the options side, the market maker’s gamma exposure is zero dollars per every 1% move. I’d be very careful about betting on GOEV.
On the date of publication, Josh Enomoto did not have (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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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