It is still a confusing time to consider investing in stocks long term. The S&P 500 has been on a V-shaped recovery since its 31% drop in March. But what happens when the rally ends?
Today, we’re going to look at stocks you should most likely sell given the current outlook.
COVID-19 cases continue to rise. The U.S. Department of Labor recently reported higher unemployment numbers than expected – 1.3 million instead of 1.25 million.
There seems to have been a flock of stupid money flowing into the stock market, looking at the economy’s underlying numbers.
One reason could be the lack of sports to bet on. Casinos are also being closed.
All the Robinhood kids with money collected from couch cushions have made some very profitable trading setups – we’ve been right here to tell you about them.
Here’s why you should think about selling these stocks as we approach the fall season…
Why Sell This Stock?
The economic pundits and the stock market do not seem to be considering that most lost jobs, when this started, are lost for good. Once Joe’s Sports Bar – and the thousands like it – closed, it was not coming back.
Three months with no customers spelled the end for Lulu’s Family Dining establishment. Between Joe’s and Lulu’s, that is probably more than 50 jobs that are not coming back until business explodes again in America.
There are thousands of Joe’s and Lulu’s across the United States that will never reopen thanks to the pandemic. I do not want to be the bearer of bad news, but business probably won’t explode until there is a definitive treatment or vaccine.
The coronavirus still runs unchecked through society and the economy. We have seen a tremendous run-up from the March lows, and investors who jumped on the train have seen some spectacular gains. Now we see that California is heading back down into lockdown, and other states will be forced to follow suit.
Take some gains on stocks that have soared since March. These stocks are priced for perfection and beyond. Here’s what you should consider selling…
One Stock to Sell Right Now
Snap Inc. (NASDAQ: SNAP) has seen its stock price almost triple since lows in March. While it is a popular app, at the end of the day, it’s a camera. The company will not be profitable this year, and if it hits the analyst targets for next year, the stock will trade for 212 times earnings and about 12 times the hoped-for revenue levels.
In short, the recent price action has been a gift, and those who benefitted should take profits.
It is worth noting that shares of Snap have ugly technicals right now as well. The 14-day relative strength index has moved from above 70 and is heading lower. Several of the oscillator indicators have also recently signaled overbought sell signals.
If the virus continues to spread at the current rate, the markets could dive again, and Snap would be among the hardest hit.
There is only so much the Fed can do if we do not stop the spread of COVID-19. Further shutdowns could send the markets tumbling. Those stocks that rallied by 100% or more in just a few short months will likely give back a significant portion of the short-term gains.
Triple-digit short-term gains in individual stocks are not the norm. When you have that kind of profit, it is time to consider booking some gains. This is especially true when we are in an uncertain environment where the Fed is battling the virus for control of the economy.
No matter who wins, it has the potential to hurt stockholders. Think about cashing in here as well.
— Garrett Baldwin
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Source: Money Morning