Understandably, the concept of stocks to sell is a controversial one in the capital market. Let me rephrase that in baseball terms. As a manager, how long are you going to stay with a starting pitcher that just doesn’t have it? When you give up five runs in the first inning? How about 10? What’s the magic number that says, okay, I’ve had enough?
It’s the exact same concept with stocks to avoid. For example, as much as everyone (seemingly) loves Shohei Ohtani, the man can’t pitch in the Bronx. Per Bleacher Report, in his two career starts at Yankee Stadium, he has allowed 11 runs in three and two-thirds innings. While that’s an extremely small sample size, it’s also unusually awful.
So, it’s possible that the New York Yankees won’t pursue Ohtani for that reason in free agency. It’s nothing about the quality of the player Ohtani is. Rather, it’s just that maybe he’s not the right fit to wear the pinstripes. And that’s what we’re dealing with regarding these stocks to sell. For anyone outside of hardened gamblers, they might not be right for your portfolio.
Stocks to Sell: Qurate Retail (QRTEA)
With its shares priced at only 49 cents a pop, Qurate Retail (NASDAQ:QRTEA) should already be on your list of stocks to avoid. Outside of extraordinarily unusual circumstances, it’s highly unlikely for Qurate to bounce back from its present lowly state. Also, its main business – serving as a conglomerate that operates in the video and online commerce sectors – suffers relevancy challenges.
While its brands such as QVC and HSN (Home Shopping Network) carry social recognition and I suppose some clout, the commerce arena has changed. From a tactical view, the COVID-19 impact has caused people to value fun experiences over the acquisition of tangible products. While this circumstance may shift, it might not shift in time to save QRTEA.
Also, from a longer-term view, Qurate must change strategies because its present directive just isn’t working. Right now, QRTEA has a three-year revenue growth rate (per-share basis) of 0.1% below parity. That’s not going to cut it. I’m afraid QRTEA is one of the stocks to sell.
A global investment bank, Moelis (NYSE:MC) provides financial advisory services to corporations, governments, and financial sponsors. Primarily, the firm advises on strategic decisions, including mergers and acquisitions recapitalizations, and restructurings. As one of the most prestigious investment banking advisory institutions, Moelis has inked out a modest gain this year. Unfortunately, circumstances are starting to turn sour.
Given the high-interest rate environment, business expansionary efforts have struggled. For example, the much-hyped initial public offering (IPO) of Instacart (NASDAQ:CART) has failed to take off. Since its first public trading session, CART has lost about 26% of its equity value. Further, Moelis isn’t just suffering from a theoretical impact. For example, in the second quarter, the company posted revenue of only $179.9 million, down 26% against the year-ago quarter.
Also, what’s worrying is that its gross margin in Q2 2023 fell to 19%. In the year-ago period, this stat stood at 42.2%. Analysts also state that it’s one of the stocks to sell, seeing no upside potential over the next 12 months.
World Acceptance (WRLD)
A financial enterprise specializing in personal loans and tax counseling, World Acceptance (NASDAQ:WRLD) seems a relevant business. During rough economic circumstances, people need loans to help make ends meet. Enjoying access to personal loans – or loans without putting up collateral – may go a long way. Also, tax help is always a welcome service no matter the context.
To be sure, WRLD has gained 71% since the beginning of this year. Nevertheless, it could be one of the stocks to avoid. In the trailing six months, this performance slipped to just 19%. And in the trailing one-month period, shares are down 11%. With circumstances remaining challenging for everyday households, World Acceptance is vulnerable to a downcycle.
Most glaringly in my opinion, both its net interest and non-interest income are down year-over-year in Q2 2023. We’re talking losses of 12.3% and 18%, respectively. Also, I’m very concerned about the fundamentals. Since personal loans are not backed by collateral, that might be a “good” deal for borrowers. But it’s perdition for lenders during rough times.
Finally, analysts peg WRLD as one of the stocks to sell with a $59 downside target, implying 47% risk.
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.