Without question, one of the ugliest topics in the equities space involves the concept of stocks to sell. You mention that and you’re bound to receive flak. It’s understandable. Akin to a sports editorialist criticizing a particular club, fans of that organization naturally take offense.
Given that tribalistic sentiments only accelerate when money is involved, mentioning stocks to avoid will almost guarantee conflict. After all, you might not like the idea but there’s (usually) always someone on the other side of the trade. Nevertheless, you gotta do what you gotta do.
A critical reason why investors can’t always focus on stocks to buy centers on “toxicities.” Just like the digestive system, nutrients go in and something else goes out. Of course, a sound investment portfolio should feature more longstanding accretive enterprises. However, when certain assets no longer do it for you, you should consider at least trimming exposure.
On that note, below are some of the biggest stocks to sell now.
Upstart (UPST)
Under a decisively bullish context, Upstart (NASDAQ:UPST) would arguably represent a viable enterprise. Leveraging artificial intelligence, Upstart provides a lending platform that partners with banks and credit unions. Through this relationship, the company provides consumer loans via non-traditional variables such as education and employment to predict creditworthiness. It comes off as an environmental, social and governance (ESG) play, which is certainly respectable.
However, that alone doesn’t mean it’s exempt from consideration for stocks to sell. While UPST more than doubled in market value so far this year, that might not be a great signal. After all, since its Aug. 1 closing peak, UPST lost 64% of equity value. And if that wasn’t worrying enough, insiders don’t seem too enthused about its immediate prospects.
Per Fintel, insiders have been aggressively selling UPST since late August of this year. Now, I realize that people sell their own stock for various reasons, not all of them negative. But given the broader economic context, it’s not an encouraging look.
Also, analysts rate UPST a moderate sell with a $22.90 price target, implying 12% downside risk.
Sprouts Farmers Market (SFM)
On paper, Sprouts Farmers Market (NASDAQ:SFM) seems another odd choice for stocks to avoid. Since the beginning of the year, SFM gained over 36% of equity value. Over the trailing five years, it swung up more than 52%. Also, on a fundamental basis, the company offers a critical service. As a grocery store, it caters to obvious human needs.
However, SFM still might be one of the stocks to sell based on how fast the security stormed higher. More importantly, Sprouts could possibly suffer from the trade-down effect. Generally speaking, the brand is more expensive than your typical super market because of its specialty products. To be sure, consumers have been willing to fork over the premium.
Still, a look at the financials reveals that while revenue is rising, operating income started to decelerate. In the case of the third quarter, operating income declined 2.2%. That might be a sign that consumers are facing pressure. Also, insiders started to sell fairly robustly since August of this year.
Analysts consider SFM one of the stocks to sell with a $36.50 target, projecting more than 13% downside.
Qurate Retail (QRTEA)
An American media conglomerate, Qurate Retail (NASDAQ:QRTEA) owns and operates six leading retail brands. Among the more popular owns are QVC and HSN. Through its subsidiaries, Qurate provides 15 million consumers with a “more human” way to shop via television programs, streaming services, social media platforms and mobile applications. While interesting, I think the relevance has faded.
Among the stocks to avoid on this list, Qurate makes a comprehensively strong case in the negative. In particular, since the start of this year, QRTEA dropped almost 60% of equity value. That right there is enough reason to run away. Factor in the point that shares trade for far less than a buck and you’d have to be an extreme speculator to consider Qurate.
Finally, the era of home TV shopping may be coming to an end; hence, the extremely low stock price. Also, I’m not a fan of the insider selling given the context (though I understand it).
Bank of America Securities’ Jason Haas rates QRTEA one of the stocks to sell with a 50-cent target, implying 23% downside.
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.