7 Strong Sell Stocks Ready to Take a Deep Dive
While it’s unclear whether the market is on the precipice of another sell-off, now may be the time to clear out any strong sell stocks from your portfolio.
Even as it may seem like investors have absorbed the impact of high inflation, high interest rates, and the possibility of a 2024 recession, that may not necessarily be the case. Crude oil’s jump back to above $90 per barrel could heat back up cooling inflation.
Recent statements from the Federal Reserve suggest interest rates will stay “higher for longer,” perhaps very much longer.
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Besides affecting economic growth, this could negatively affect stock prices, as many equities were re-priced on the assumption that rates would come down starting next year.
While it may be premature to say another crash is coming, expect the stock market to remain bumpy in the near term.
With this in mind, lowering exposure to richly-priced and/or speculative names, such as these seven strong sell stocks, is likely a wise move.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) has lost its “meme king” status. After pulling back slowly over the first seven months of this year, shares in the movie theater operator have fallen off a cliff since August.
Trading in the mid-$40s per share a little over a month ago, AMC stock now changes hands for about $7.75 per share. Yet while it may seem like the dust could soon settle, I wouldn’t wager on it. Further steep drops may lie ahead.
The latest sell-off has been driven largely by AMC’s decision engage in heavy shareholder dilution.
As InvestorPlace’s David Moadel recently discussed, while CEO Adam Aron has tried to spin the company’s latest equity offering as a positive, the investing public is not buying it.
As AMC’s cash burn issue persists, more dilutive capital-raising is likely, making this a stock to avoid at all costs.
Carvana (CVNA)
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Shares in online used car retailer Carvana (NYSE:CVNA) have experienced an incredible run so far this year.
The stock is up by more than ninefold year-to-date. As I discussed back in July, this has been because of retail traders putting the squeeze on the short side.
Positive developments like the company’s debt restructuring, have helped CVNA stock stay at elevated prices. However, even as the short-side has lost billions betting against Carvana, and meme traders have laughed all the way to the bank, if you currently hold a position, you may not want to let it ride.
Sell-side forecasts still call for Carvana to remain in the red until at least 2025. Unless the company really beats expectations, that may prove easier said-than-done. Shares are at high risk of coughing back most of their recent gains. This makes CVNA one of the strong sell stocks.
National Beverage (FIZZ)
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In contrast to AMC and Carvana, National Beverage (NASDAQ:FIZZ) represents ownership in a steady, profitable business.
The company is best known for its LaCroix sparkling water brand, but the beverage maker owns soft drink, energy drink, and juice brands as well.
The issue with FIZZ stock is not with the company’s financial health. Rather, it is with the stock’s valuation. At 25 times forward earnings, FIZZ sells for a premium to blue-chip peers like Coca-Cola (NYSE:KO) and Pepsico (NASDAQ:PEP).
If National Beverage were growing at a faster clip, this in theory could be justified.
However, while the company recently touted “record results” for the preceding quarter, these results fell short of analyst forecasts.
While shares pulled back on this disappointment, further declines may be ahead. Sell-side estimates call for slower levels of earnings growth in the coming years. FIZZ could remain under pressure because of valuation concerns.
Hudson Pacific Properties (HPP)
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Even among real estate investment trusts (or REITs) holding commercial properties, Hudson Pacific Properties (NYSE:HPP) is one that is in a precarious position. As I discussed back in August, this REIT is struggling.
The work-from-home trend keeps affecting the performance of this REIT’s office portfolio. Plus, the Hollywood union strikes are serving as a material headwind for the REIT’s portfolio of sound stages and film/TV production facilities. Since making my bear case against HPP stock, shares have climbed higher.
However, this bounce-back is reversing course. HPP has resumed selling off, following the REIT’s decision to suspend its dividend completely.
Even if all the Hollywood strikes ended tomorrow, as a Seeking Alpha commentator recently argued, other issues, like rising interest expenses, and upcoming debt maturities, remain risks. With these in mind, HPP is still one of the strong sell stocks.
Lucid Group (LCID)
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Lucid Group (NASDAQ:LCID) may be well-capitalized and high-profile like Rivian Automotive (NASDAQ:RIVN), but instead of being a future competitor to the likes of Tesla (NASDAQ:TSLA), this electric vehicle startup may be more likely to end up an EV flameout.
Investors are well aware of the major disappointment with Lucid. That’s why LCID stock, no longer considered a “Tesla killer,” has fallen to $5.25 per share, within reach of entering penny stock territory.
One analyst (RBC’s Tom Narayan) is arguing this upstart can achieve success licensing its technology, but don’t be fooled.
As Louis Navellier and the InvestorPlace Research Staff recently argued, this “new bull case,” along with another bullish argument, are merely cases of the long side of this trade grasping for straws.
Likely to keep dropping because of disappointing sales, heavy cash burn, and continued shareholder dilution, stay away from LCID.
Planet Fitness (PLNT)
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Admittedly, it may seem too late to say that Planet Fitness (NYSE:PLNT) is one of the strong stocks to sell.
The fitness center franchising company’s shares recently cratered in price, following the surprise ouster of longtime CEO Chris Rondeau on Sep. 15.
PLNT stock dropped 15.9% on the news. Shares have continued to pull back, and could continue to trend lower.
As Jeffries’ Randal Konik argued, in an analyst downgrade (from “Buy” to “Hold”) issued after the CEO exit news, without Rondeau at the help, the company’s relationship with its franchisees could be negatively affected.
That’s not all. High inflation is also a big issue for Planet Fitness. Besides putting pressure on existing gyms’ performance, rising costs are hindering the opening of new franchise locations. Taking these issues into account, it may be a while before the dust settles with the PLNT sell-off.
Plug Power (PLUG)
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The global push to “go green” reached a fever pitch in early 2021. That’s also when Plug Power (NASDAQ:PLUG) shares peaked in price.
This hydrogen fuel cell company was on verge of scaling into a large, profitable company. As you likely know, this failed to take shape.
Instead, a combination of poor execution, coupled with the fact management and investors overestimated how quickly the company would enter high growth mode, have led to big disappointment.
Some remain bullish that shares could make a leap back toward prior price levels, but a full retreat to pre-boom prices (under $5 per share) may be more likely. At least, given continued delays in expanding hydrogen production capacity, not to mention Plug’s consistent cash burn issue.
On the date of publication, Thomas Niel 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
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