Sell These 3 Blue-Chip Stocks Immediately
Usually, the largest and most-established publicly traded enterprises offer sensible investment ideas but that’s no guarantee, which brings us to the topic of blue-chip stocks to sell. Unfortunately, even the giants aren’t immune to worrying market risks. And as we learned in physics class, the gravitational pull of the Earth is the same for all objects, irrespective of their mass.
Extending the above analogy, while the acceleration may be the same, the impulsive forces exerted upon impact with the ground will of course vary between solid objects of different masses. In the market, blue chips rarely fail. But when they do, they take down millions of investors and may cause seismic ripple effects. That’s why it’s important to keep note of blue-chip stocks to avoid.
Before the hate mail pours in, blue chip investing generally represents the smart conservative approach. However, even conservative ideas can trip up. Therefore, you should be wary of these blue-chip stocks printing troubling stats.
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Invitation Homes (INVH)
Source: shutterstock.com/Black Salmon
At the very real risk of starting this list of blue-chip stocks to sell as a complete clown show, I nevertheless have reservations about Invitation Homes (NYSE:INVH). A powerhouse within the realm of single-family rental homes, Invitation has performed quite well this year. Since the Jan. opener, INVH gained nearly 21% of equity value. And while it’s down 1% in the trailing 365 days, it’s been moving upward at a steady clip.
Still, I’m getting the wrong kind of tingling feeling in my gut when I look at the company’s first quarter of 2023 earnings report. Sure, the headline revenue print gained nearly 11% to $590 million. However, the average occupancy in Q1 came in at 97.8% compared to 98.2% in the year-ago quarter. As well, bad debt increased to 2% from 1.7%. Finally, new leases were 5.7%, down conspicuously from the 14.5% posted in Q1 2022.
Fundamentally, it seems that broader economic pressures are weighing on consumers. In fairness, we’ll find out more when Invitation releases Q2 results next week. For now, I’m going to say it’s one of the blue-chip stocks to avoid.
Global Payments (GPN)
Source: shutterstock.com/Leonid Sorokin
A multinational financial technology (fintech) enterprise, Global Payments (NYSE:GPN) provides payment technology and services to merchants, issuers and consumers. Per its public profile, the company was named to the Fortune 500. Primarily, the company processes payments made through credit/debit cards and digital and contactless payments. Since the start of the year, GPN gained nearly 13% of equity value.
Thanks to its combination of decent market performance and broader relevancies, GPN hardly seems like one of the blue-chip stocks to sell. While I again risk becoming a clown act here, investment data aggregator Gurufocus warns that Global suffers from three red flags: continued issuance of long-term debt, asset growth moving faster than revenue growth and an Altman Z-Score indicating business distress.
Fundamentally, if the Federal Reserve decides to raise rates to truly get serious about inflation, consumer sentiment will likely fade. Also, mass layoffs may materialize, which would be bad news for consumer-spending-dependent blue chips. With households grappling with over $17 trillion in debt, the backdrop for GPN is messier than some investors realize.
Philips (PHG)
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Perhaps the most recognizable name on this list of blue-chip stocks to avoid, Philips (NYSE:PHG) is a Dutch multinational conglomerate. Formerly one of the largest electronics firms in the world, Philips now concentrates on myriad personal care and consumer products. Thanks in large part to its wide relevance, PHG gained over 53% of equity value since the Jan. opener. So, this is one to sell?
From a narrow context, PHG seems a no-brainer buy. However, in the trailing five years, shares slipped 43%. That’s a no-no in blue chip investing. Plus, I’m not really digging that PHG fell almost straight through the $30 long-term horizontal support line. It’s got to get up there and build a positive baseline for risk-intolerant investors to be interested.
And it’s not just the clown in me speaking: Gurufocus warns that PHG rates as a possible value trap. Sure, it’s trading at a forward earnings multiple of 17.51, which seems incredibly cheap. However, operating losses expanded unfavorably to $625 million in Q1 2023. This contrasts with an operating loss of $200 million in the year-ago quarter. Given possible consumer headwinds ahead, I’d be tempted to sell into strength.
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.
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