5 stocks to sell or avoid now
It’s been a terrible year so far for stocks, yet the market remains littered with stocks to sell in anticipation of even bigger losses.
Admittedly, one of the worst starts to a year in market history has surely created an assortment of bargains. But it hardly follows that every stock is worth buying on the downside.
While being greedy when others are scared is a generally good first principle, remember that some stocks go down for good reasons. These stocks for sale have plenty of room to drop even further.
Given that negative ratings on stocks are extremely rare on Wall Street, now seemed like a good time to see which names analysts are collectively pointing to as stocks to sell now. To that end, we used data from YCharts and S&P Global Market Intelligence to screen the Russell 1000 Index for stocks with the most compelling consensus sell recommendations by industry analysts.
Here’s how the scoring system works: S&P reviews analyst stock calls and rates them on a five-point scale, where 1.0 is strong buying and 5.0 is strong selling. Any score of 3.5 or lower means that analysts, on average, rate the stock as Sell. The closer a score is to 5.0, the stronger the consensus sell recommendation.
After running the screen, we ended up with a very short list of names. (As we said above, sales calls are rare.) And while they come from industries as diverse as retail, insurance and utilities, they all have one thing in common: The Street expects them to easily underperform the market at broadly over the next 12 months or so.
Read on for more information on the top five Wall Street stocks to sell now.
Stock prices, price targets, analyst recommendations and other market data are as of March 9, courtesy of S&P Global Market Intelligence and YCharts, unless otherwise noted. Stocks are listed by analyst sell call conviction, from weakest to strongest.
Hawaiian Electrical Industries
- Market value: $4.6 billion
- Consensus recommendation from analysts: 3.6 (Sell)
Hawaiian Electrical Industries (ET, $41.99) the stock is holding up pretty well so far in 2022. It’s been essentially flat year-to-date versus a 16% decline for the S&P 500.
The Street, however, says the outperformance should come to an end in a big way.
The five analysts covering this utilities stock collectively see it as a hair on the negative side. The mid-price target of $41.60 implies the stock is a bit overvalued and the ratings are leaning to the sell side, three-takes, a sell and a strong sell, according to S&P Global Market Intelligence.
Pros who have Hawaiian Electric among their stocks for sale think the company is on the verge of a crash. UBS Global Research analyst Daniel Ford rates the stock as Sell, and his price target of $36 gives HE stock an implied decline of around 15% over the next 12 or so months.
This is partly due to the company’s unique total exposure to its condition. Hawaiian Electric Industries comprises three operating subsidiaries: Hawaiian Electric, an electric utility serving 95% of Hawaii; American Savings Bank, one of Hawaii’s largest financial institutions; and Pacific Current, an independent subsidiary that aims to advance Hawaii’s sustainability goals.
As such, HE was somewhat of a COVID-19 recovery game, but now much (if not all) of the upside has been priced in. The valuation would certainly seem to support this view.
Indeed, shares are trading at just under 20 times Street’s earnings per share (EPS) estimate for 2022. Meanwhile, analysts expect the company to generate modest average annual EPS growth of less than 8% over the next three to five years.
Southern Copper
- Market value: $45.1 billion
- Consensus recommendation from analysts: 3.75 (Sell)
Southern Copper (SCCO, $58.38) the stock is down more than 5% year-to-date. While this beats the broader market by a wide margin, the Street says its days of outperformance are coming to an end.
Shares of the copper miner, smelter and refiner are getting a consensus sell recommendation, with fairly strong conviction. Of the 16 analysts covering SCCO tracked by S&P Global Market Intelligence, eight rate it Hold, four say Sell and four call it Strong Sell.
The decline stems primarily from political and social upheaval in Peru, where the company maintains a key presence. SCCO saw its copper production drop 10% in the last quarter after community protests forced it to halt work at its Cuajone mine.
The mine has since returned to full capacity, but tensions remain high. Indeed, BofA Securities joined the pros listing Southern Copper among their stocks for sale earlier this year, downgrading the stock to Underperform due to the potential for further unrest in Peru.
At the same time, SCCO is also struggling with lower ore grades and recoveries at other mines, notes CFRA Research analyst Matthew Miller, who rates stocks at Hold. These headwinds forced the company to cut its full-year production forecast by 3%, the analyst added.
The Street is also concerned about Southern Copper’s heavy reliance on the Cuajone mine, which accounts for 40% of the company’s output in Peru.
Photocopy
- Market value: $2.7 billion
- Consensus recommendation from analysts: 4.00 (Sell)
Photocopy (XRX, $17.24) The stock has lost almost a quarter of its value so far this year, but you won’t find any analyst pleading with clients to buy the drop in this long-trailing market. date.
Indeed, shares of the digital printing company have carried a consensus sell recommendation for over a year, and it’s not hard to see why. XRX has underperformed the broader market by pretty epic margins in five of the past seven years.
Apparently, there’s little reason to see him break that streak anytime soon.
“Before the pandemic, Xerox had struggled with the rise of the paperless workplace and corresponding decline in imaging equipment revenues,” writes Kristina Ruggeri (Hold), analyst at Argus Research. “The increase in work-from-home practices during the pandemic has further accelerated this trend.”
At the same time, supply chain disruptions are hampering the company’s efforts to manufacture higher-margin products, and inflation is weighing heavily on input costs.
“We expect these headwinds to weigh on sales and earnings through 2022 and believe it will take time for the company’s transformation efforts to gain traction,” Ruggeri said.
The majority of the seven analysts with opinions on XRX have it among their stocks for sale. Specifically, three call Xerox a Hold, one says it’s Sell, and three have it at Strong Sell.
General Mercury
- Market value: $2.8 billion
- Consensus recommendation from analysts: 4.00 (Sell)
Single Analyst Covers P&C Insurance Stocks General Mercury (MCY, $49.80), which should give potential investors pause in and of themselves.
The fact that the only analyst following MCY is making a rare sell call makes this name all the more unattractive.
Raymond James analyst C. Gregory Peters rates MCY at Underperform (equivalent to Sell), citing a number of factors. On the one hand, the insurance underwriter continues to suffer from supply chain issues and inflationary pressures endemic to the auto and real estate markets.
In addition to the fact that consumers don’t need to buy insurance for cars they can’t find or afford, MCY grapples with California Department of Insurance pricing policies.
“CA’s Department of Insurance is notoriously anti-industry and anti-insurance policy, which we believe could make rate approvals even more problematic given that this is a year election,” writes Peters. “In the worst case, the CA DOI could delay rate increases for up to two years.”
MCY stock has been beating the broader market year-to-date, but is still down about 6%. Raymond James’ Peters doesn’t have a price target for the stock, saying it’s not important at this point.
“Our underperforming rating primarily reflects the longer-term structural challenges associated with California,” he said.
GameStop
- Market value: $7.5 billion
- Consensus recommendation from analysts: 4.33 (Sell)
The godfather of meme stocks is about to drop massively, at least as far as Wall Street pros are concerned. And that’s after falling by more than a third since the start of the year.
The average analyst target price of $26.50 gives the shares GameStop (GME, $98.79) implied a 73% decline over the next 12 months or so. Their consensus recommendation, of course, is Sell.
To be fair, we’re talking about a tiny sample of recommendations here. Only three analysts take the trouble to issue opinions on GME. Of those remaining, one rates the stock at Hold and two call it a strong sell, according to S&P Global Market Intelligence.
Once upon a time – before shares of the brick-and-mortar video game retailer became a plaything for social media day traders – no less than 10 analysts covered GME. But once the stock price move was divorced from reality — it gained 1,740% in a matter of weeks at one point in early 2021 — fundamental research became pointless.
This disconnect continues to be a challenge for the few stubborn analysts who maintain cover on the name.
“The stock price continues to trade at levels completely disconnected from company fundamentals due to continued support from some retail investors,” wrote Wedbush analyst Michael Pachter. “As a result, we continue to believe that an underperforming rating [the equivalent of Sell] is guaranteed.”