Generally speaking, Americans consider themselves an optimistic bunch. As a result, the topic of stocks to sell can draw anger. And since I drew the short end of the stick, I have little choice but to broach this subject again. Despite the toxicities involved, however, it’s important to realize that not every enterprise will succeed. And some might face catastrophe this year.
Here’s the deal. While the Dec. inflation report turned out favorably (i.e. lower consumer prices), the Federal Reserve can’t pull its foot off the gas. If it does, it’ll just unwind all the work it did. As well, the central bank may face another challenge: rising money velocity. In other words, more spending could force more rate hikes, exacerbating problems for stocks to sell.
That’s not to say that I have a crystal ball here because I don’t. Nevertheless, with myriad obstacles ahead, it may be best to avoid these stocks to sell.
| OPEN | Opendoor | $1.76 |
| GOEV | Canoo | $1.32 |
| BBBY | Bed Bath & Beyond | $4.19 |
| PTON | Peloton | $11.73 |
| VRM | Vroom | $1.03 |
| APRN | Blue Apron | $1.06 |
| W | Wayfair | $43.29 |
Stocks to Sell: Opendoor (OPEN)
Leveraging advanced technologies such as artificial intelligence, Opendoor (NASDAQ:OPEN) and its use of the iBuyer business model to quickly buy and flip homes seemed very attractive prior to the coronavirus pandemic. Even roughly two years following the outbreak of Covid-19, Opendoor seemed a viable option for speculation. Unfortunately, those days are probably gone.
Effectively, the iBuyer model faces an existential crisis according to multiple respected business outlets. For one thing, higher interest rates translate to fewer buyers in the market. Therefore, even if you bought a home, the flipping component of the equation would be troubled. Second, with the relatively few sellers seeking the maximum dollars possible, they’ll probably work with traditional brokers, not Opendoor.
These two reasons should be enough to make OPEN one of the stocks to sell. Sure, on a year-to-date basis, Opendoor gained 51% of its equity value. However, the more emblematic picture (in my view) is the over 84% loss in the trailing year.
Stocks to Sell: Canoo (GOEV)
I’m probably going to get a boatload of criticism for mentioning Canoo (NASDAQ:GOEV) as one of the stocks to sell. After all, earlier on, Canoo represented one of the more interesting takes in the electric vehicle space. However, as the narrative matured, it became apparent that plying on one’s trade in the EV sector isn’t as easy as it looks.
And that’s particularly problematic as Canoo faces significant competitive pressures. For instance, for EV speculation, interest in Mullen Automotive (NASDAQ:MULN) basically rises above the others. Even without distractions like Mullen, the reality is that the world doesn’t need endless automotive brands. More than likely, in the future, the big boys will swallow up any smaller but viable enterprises. The rest will fade away.
To be fair, GOEV features a short interest of 26.81% of the float, which is up there. Therefore, I wouldn’t call it one of the securities to short. However, after dropping nearly 79% in the trailing year, it’s probably one of the stocks to sell.
Stocks to Sell: Bed Bath & Beyond (BBBY)
Although embattled retailer Bed Bath & Beyond (NASDAQ:BBBY) had its moments last year, a likely few would complain about its inclusion on this list of stocks to sell. BBBY may still give intrepid contrarians some upside, considering its short interest of 33.54% of the float. As well, it’s up over 58% for the year so far. Still, investors shouldn’t lose track of the fundamentals.
As an article on The Street warned, buying BBBY stock is a bad idea. And why so? Well, the Washington Post recently provided clarity, suggesting that for the embattled retailer, bankruptcy may be the only option. Sadly, the company lacks relevance. People can always get their household goods on e-commerce platforms. And the segment itself suffers from poor housing sentiment.
Further, a discussion about possible bankruptcy provides a sharp warning for new investors. As a common shareholder, you would be last in line in terms of recouping losses from company assets. Knowing this, BBBY is best kept in the bucket of stocks to sell for most market participants.
Peloton (PTON)
Let’s face it: Peloton (NASDAQ:PTON) needs the Covid-19 pandemic to come back. Yes, it’s a crude thing to say. But I’m at a loss as to what else can save this company. During the worst of the global health crisis, sales of indoor exercise bikes soared. Even the U.S. Census Bureau acknowledged that shelter-in-place orders boosted investments like PTON stock.
Those days are long gone. With fears of Covid-19 fading into the rearview mirror, people no longer want to quarantine. Indeed, the Pew Research Center noticed a spike in loneliness during the pandemic, fueling phenomena such as revenge traveling. To be sure, though, loneliness only applies in a social context. In a work context, suddenly, a majority of people become introverts by choice.
Moving forward, it’s going to be extremely difficult for Peloton to dig itself out of its hole. Financially, its balance sheet is distressed while its profit margins sunk deep into negative territory. It’s also overpriced against book value, meaning that PTON clearly ranks among the stocks to sell.
Vroom (VRM)
As with Peloton above, used-car dealership Vroom (NASDAQ:VRM) – which specializes in online car delivery services – needs the Covid-19 pandemic to make a comeback. Otherwise, without this cynical tailwind, Vroom loses a key catalyst. Fundamentally, during the crisis, Vroom facilitated largely contactless transactions. Today, people really couldn’t give a hoot about such a service.
More importantly, they’re not going to pay a premium for it. And that brings up an important economic point. If we lived during normal circumstances, it’s possible that consumers at large may pay for a convenience premium. However, because of the higher borrowing costs associated with rate hikes, people want to save as much money as possible. Frankly, they’re not going to get that discount through Vroom.
Of course, it’s risky to short VRM right now, particularly with the short interest of 19.3% of the float. However, the underlying company lost 86% of its equity value in the trailing year. It’s easily one of the stocks to sell.
Blue Apron (APRN)
Fundamentally, I appreciate the meal-kit delivery service that Blue Apron (NYSE:APRN) provides. While people can obviously save money by prepping their own food rather than ordering take-out or delivery, it’s difficult to save time. For me and other gig workers, we’re typically interested in the latter. With Blue Apron providing a balance between delivery and home cooking, APRN enjoyed a viable case (at first).
In reality, the narrative failed to catch on. Just in the trailing year, APRN lost a devastating 86% of equity value. When you consider the valuation of the underlying enterprise at its initial public offering, it’s practically lost all its value. Combine this gross underperformance with the company’s layoff announcement, Blue Apron is simply gasping for air. True, the short interest of 45.28% (which rates incredibly high) might make it a target for near-term bullish speculation. Sadly, with a distressed balance sheet and negative profit margins, APRN sits among the stocks to sell.
Wayfair (W)
It wasn’t too long ago that seemingly everyone sang the praises of e-commerce furniture retailer Wayfair (NYSE:W). After sliding precipitously during the initial onset of the Covid-19 crisis, W stock shot to the moon. It stayed relatively elevated until late Nov. 2021. Since then, Wayfair went into freefall, though it’s trying to make a comeback in the new year.
Indeed, since the January opener, W gained 32% of its equity value. Further, the company features a short interest of 32.17% and a short interest ratio of 5.67 days to cover. These metrics (particularly the former) ring higher than comfortable, meaning that conservative traders shouldn’t short Wayfair. But as a long-term enterprise, I think it’s better to consider it one of the stocks to sell.
Fundamentally, the erosion of the real estate market imposes downwind pressures on Wayfair: fewer home sales translate to less need for furniture. Also, Wayfair features the same issues as other stocks to sell, which are distressed financials and negative margins. Therefore, it’s probably best just to walk away.
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.