Turn on business news and chances are, you’ll find more pundits talking about how the craziness in the broader investment market will continue inching forward. But at some point, everybody has to at least start considering stocks to sell. Simply put, the arena is full of both bulls and bears. And the latter may be coming out of hibernation hungry.
Look at it this way. Right now, the housing market — particularly in major metropolitan areas — is booming. People are panicking, driving up prices. As well, many experts cite low inventory as the cause, a condition that won’t ameliorate anytime soon. But the thing is, even with extremely deflated supply, there is a maximum limit to how high prices go. It’s just the nature of the beast, which brings me to stocks to sell.
Right now, the biggest concern is excessive speculation. According to the Financial Industry Regulatory Authority (FINRA), stock trading on margin has hit all-time records on a consecutive basis this year. Of course, leverage is awesome when you’re in a decisive bull market. When valuations go awry, though, it is a very different story. Further, the pressure to avoid severe financial pain will likely accelerate stocks to sell.
Furthermore, we have a bifurcated economy. Sure, the novel coronavirus pandemic has been a financial boon for white-collar workers and the affluent. The former have been able to work from home, saving commuting costs, while the latter have enjoyed remarkable gains in their portfolios. But bifurcation implies deflation — fewer people that are economically capable of keeping the music going. That to me seems to incentivize stocks to sell, not the other way around.
Speaking of deflation, that’s exactly the biggest long-term threat. The national gross domestic product (GDP) on an annualized basis is back up to normal, around $22 trillion. But the difference is that the employment level is down roughly 5%. Productivity up, overhead down — a classic hallmark of deflation. That’s another reason why you should take a look at these stocks to sell while you still have a chance.
Finally, I think it’s worth noting that even if you’re an optimist, severe concerns exist regarding vulnerabilities, both artificial and natural. I’m not sure how many more crises our society can handle. Therefore, it’s time to think about stocks to sell, even if you’re not yet ready to pull the trigger.
- Nio (NYSE:NIO)
- Marathon Digital Holdings (NASDAQ:MARA)
- Sundial Growers (NASDAQ:SNDL)
- Castor Maritime (NASDAQ:CTRM)
- Bumble (NASDAQ:BMBL)
- Novavax (NASDAQ:NVAX)
- Hertz (OTCMKTS:HTZGQ)
Stocks to Sell: Nio (NIO)
While mentioning Chinese electric vehicle (EV) manufacturer Nio and stocks to sell in the same sentence is sure to arouse anger, I think it’s at least time to think about taking some profits off the table. No, you don’t have to take it all off the table. I don’t think going all-in on anything on either the bull or bear side is particularly wise. But NIO stock may be due for a correction.
Primarily, I’m skeptical about the limitations of the EV battery. The lithium-ion battery has been a dependable source of energy for the innovative transportation platform. But it’s also reaching its practical limitations — and that’s more of a science problem than it is something related to a specific EV brand.
Nevertheless, it’s a headwind that every EV maker has to think about. It’s akin to filling an inflatable kiddie pool with a firehose. No matter how robust the kiddie pool is, it’s not going to withstand the pressure. Hence, the industry is researching and developing a solid-state battery. But who knows when this will be commercially viable?
In the meantime, I’m not sure if I want to expose my money to NIO stock, particularly after it’s gained over 800% in the trailing year.
Marathon Digital Holdings (MARA)
I know what it’s like to have sentimental feelings toward inanimate objects. Recently, I sold my car — the first new one that I bought with my own money. I kept it around all these years as a beater car to not put excessive miles on my primary vehicle. But at a certain point, you have to let go because the economics don’t make sense.
That’s my sentiment toward Marathon Digital Holdings. Yes, I have a short position in MARA stock, as I mentioned in prior InvestorPlace articles. But that’s not the main reason why I’m putting Marathon Digital on this list of stocks to sell.
I’m a believer in the long-term trend of cryptocurrencies. But the harsh reality is that this market has gotten well ahead of itself. Further, even if crypto coins rise in value, that doesn’t necessarily mean MARA stock will follow. With so much volatility in the underlying industry, derivative markets like crypto-mining ventures become extremely risky.
Clearly, rational investors recognize the extraordinary threat to Marathon’s lofty premium. Despite recent strong moves, it’s down 36% over the trailing month. It’s really time to start thinking about taking some profits.
Sundial Growers (SNDL)
When you look at the comparison from peak valuations, it’s difficult to see Sundial Growers as anything but a discount. Perhaps you might even consider it a compelling one. After all, we’re talking about cannabis, the much-maligned plant that has enjoyed a paradigm shift in acceptability. That’s thanks to demographics — younger people are much more tolerant about adult liberties.
Anyways, at time of writing, SNDL stock is down 80% from its closing high of this year. From its all-time closing high, the comparison is even more staggering — 94% down. Based on the fundamentals that consumers are increasingly “canna-curious,” you might think that SNDL doesn’t belong on a list of stocks to sell. Plus, shares are priced below a buck.
Well, you might want to consider the myriad reasons why shares are on the sub-dollar menu. As well, saying that an equity unit dropped 94% from its highs isn’t exactly a strong point. That’s especially the case when it appears that investors are becoming tapped out from their speculation into other popular trades.
In my view, the competitive threat is troubling for all cannabis stocks at this point. Further, potential economic woes down the line mean that the black market can also impose pressures. I’d look for another speculation candidate if you want to gamble.
Castor Maritime (CTRM)
Whatever you think about Castor Maritime, we can all agree that it’s an important lesson in the thrills and spills of speculation. When I first wrote about CTRM stock in early February of this year, I had a feeling that shares could jump higher. While doing my write-up, I noticed strong buzz regarding the equity unit. Therefore, I mentioned this “Collective power of the internet.”
Frankly, it’s not a train you want to jump in front of, whether it’s carrying Castor Maritime shares or any other company’s security. But even the wildest social media plays always come to an end, and that end came very quickly on Feb. 11. Since then, CTRM has been incredibly profitable as one of the stocks to sell. This goes to show you that you should never let others egg you on regarding your investments.
Anyways, CTRM still carries skepticism because based on trends from the latest April retail sales report, American consumers are shifting their spending habits from physical goods to services. That could be a trend everywhere else as Covid-19 cases generally decline, which isn’t helpful for a dry bulk carrier business.
Bumble (BMBL)
Bumble is another company that I’m a bit sad to put on this list of stocks to sell. Another company that I previously covered, this time around, I discussed the potential upside and risks with its initial public offering (IPO). This is a distinct case because the core business ethos is both the asset and the liability.
As you may know, Bumble separates itself from other dating sites and apps by putting women in the driver’s seat (assuming a heterosexual relationship dynamic). That’s intriguing due to the broader push for gender equality. At the same time, I noted that it’s a risk, stating, “Though women users as the driving force behind Bumble is unique, that doesn’t necessarily guarantee success. Pigeonholing users into one behavior may not turn out to be the best move.”
Here’s the deal. Several dating platforms cater to specific markets, such as intra-community or intra-religious dating. There’s absolutely nothing wrong with people finding comfort (and love) in the familiar, just as there’s nothing wrong with women in control. But such niche services present a math problem.
I think Bumble can work. But it must have other options without such restrictions where only women can initiate first contact. Until that time arrives, though, investors see too much risk with narrow-focused BMBL stock.
Novavax (NVAX)
Novavax really stinks for me because I’ve done so much research into the topic. From my understanding, its underlying subunit-vaccine approach is the most traditional of the options available because subunits have been used for several other types of vaccines. The nucleic-acid approach, such as messenger-RNA-based vaccines, is a newer approach. Nevertheless, it’s the mRNA vaccines that are winning out, which puts pressure on the investment case for NVAX stock.
That’s not to say that the science isn’t impressive, because it is. Going into the heat of this crisis, biotechnology and pharmaceutical experts knew that mRNA vaccines had the advantage of rapid-fire manufacturing speed. Essentially, companies that deployed this approach could get up and running while competing platforms finetuned their solutions.
Unfortunately for Novavax, that’s exactly how things turned out. Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) got off to the quick lead. Despite the rollout challenges, their vaccines are readily available. On the other hand, Novavax reported more delays. It’s possible that by the time it gets its ship in order, the crisis could be gone.
We’ll see how the company responds. But for now, I think it’s time to put this on a list of stocks to sell if you’re profitable.
Hertz (HTZGQ)
Given the wild trading that we’ve seen, it was inevitable that Hertz would once again light up the headlines, this time for positive reasons. Initially, Hertz was one of the poster children for stocks to sell. With the airline industry all but shuttered during the worst of the pandemic, there was really no revenue opportunity for the rental car giant.
Even worse, the company was already suffering from declining demand due in large part to the ride-sharing phenomenon. Plus, the sharing economy concept trickled into other millennial and Generation Z behaviors, putting a damper on HTZGQ stock. Then the pandemic hit and sent the underlying company into bankruptcy.
However, as our own Brenden Rearick noted, Hertz is reviewing proposals by a handful of capital management firms to get the rental car company out of Chapter 11 bankruptcy. Naturally, HTZGQ skyrocketed. Over the trailing month, shares are up a staggering 233%.
Still, this might be a case of buy the rumor, sell the news. After such a remarkable spike up, it’s hard for me to envision that HTZGQ will keep going. You still have the headwind of ride-sharing present. As well, air transportation demand — while much improved — is still down roughly 30% from pre-pandemic levels.
Those are steep challenges to overcome. Therefore, I think it’s better to consider this as one of the stocks to sell rather than an upside speculation opportunity.
On the date of publication, Josh Enomoto held a SHORT position in MARA. 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.