Hedge Fund Leftovers: 3 Stocks to Sell as Elite Interest Dwindles
The U.S. economy is navigating a delicate balance between achieving a significant cooldown of inflation and avoiding a recession. Policymakers have managed to guide the economy toward a “soft landing,” but challenges persist as they strive to further reduce inflation without triggering a downturn.
While a positive outlook prevails among economists, potential pitfalls include the Federal Reserve’s forecasted interest rate cuts, upcoming elections in major economies, and the balance between stimulating spending and avoiding a resurgence of inflation.
Despite recent positive economic signals, uncertainties remain, and experts emphasize the need for cautious policy measures to sustain growth. These three stocks look less promising amid the uncertainty.
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Southern Copper Corp. (SCCO)
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Southern Copper Corp. (NYSE:SCCO) is a mining company that engages in exploring, smelting, and refining copper among other minerals in South America. Six WSJ analysts give SCCO a ‘sell’ rating and forecast a median 12-month price target of $64.00, with a high and low of $93.00 to $47.00.
The global mining industry is expected to grow at a CAGR of 5.1% from now until 2030. Government support for digital mine innovations and improvements in extraction technologies have strengthened the market
SCCO has reported a 16.17% year-over-year increase in revenue to $2.51 billion in Q3. The company’s EPS also saw a 19.40% increase to $0.80. With a levered FCF margin of 27.39%, SCCO stands out among its competitors. However, zinc production and sales for zinc and copper also decreased by over 10% in Q3. The company’s total operating costs and expenses increased by $67 million, or 5%, in comparison to 2022. Silver production also fell by 10%, and the production of refined silver fell by 11.4%.
Expeditors International of Washington Incorporated (EXPD)
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Expeditors International of Washington Incorporated (NYSE:EXPD) is a global logistics company specializing in various transportation logistics services. Seven WSJ analysts give the stock a ‘sell’ rating, forecasting a median 12-month price target of $105.00, ranging from a high of $128.00 to a low of $84.00.
The global logistics market is predicted to grow at a CAGR of 10.7%, reaching $18.23 trillion by 2030. Increasing digitization in the transportation process and the expansion of the e-commerce industry into the logistics market all serve as key growth factors in this market.
In Q3, Expeditors International reported 2.19 billion, shrinking 49.80% year-over-year. EPS declined by 54.33% along with a 71.25% decrease in FCF. With EXPD’s struggling financial performance in Q3, the company is likely to see further declines in financials in the upcoming quarter due to a continued deceleration in demand and soft rates.
Inflationary pressure has increased the prices of consumer goods and is one of the many factors contributing to a mismatch of supply and demand in the shipping industry. This caused shipping rates to fall below the pandemic period. EXPD also cut its workforce by 8% since the end of 2022, indicating poor financial performance.
C.H Robinson Worldwide (CHRW)
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C.H Robinson Worldwide, Inc. (NASDAQ:CHRW) is a transportation company primarily offering freight transportation, along with management, brokerage, and warehousing.
Most analysts rate CHRW as a hold or market underperform, indicating weak performance from the stock. Additionally, they target a median price of $87.50 which is below the current price. This median price target signals that most analysts are pessimistic about the stock’s ability to generate more returns.
CHRW competes in the Freight and Logistics market, which has a projected CAGR of 5.87% from 2022 to 2028. The key driver towards the growth of the industry is the rising construction of infrastructure. Another variable to consider factoring in the growth of the market is third-party logistics, allowing convenient yet wide-ranged services, which encourages business expansion.
CHRW sales grew from $23,102 million in 2021 to $24,697 million dollars in 2022 for a sales growth rate of 6.90%. However, this pales in comparison to the 42.54% growth rate in the previous year, indicating a slowdown in revenue. Other metrics have demonstrated a similar slowdown in the company’s overall growth. For instance, net income only grew by 11.40% in 2022 in comparison to 66.71% in 2021.
The freight recession throughout this year has impacted CHRW’s ability to generate returns. It seems the recession will keep disrupting the company’s stock which is projected to continue into 2024. The continued slowdown will make it difficult for CHRW to find an effective way to generate revenue.
Slow financial growth and the freight recession are good reasons for investors to sell shares of C.H. Robinson.
On the date of publication, Michael Que 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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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