We’ve all heard the adage, “Sell in May and Go Away,” but should investors in contemporary times target stocks to sell in the fifth month of the year? According to Corporate Finance Institute, under the original context, the British upper class would sell their securities in May so that they can relax and enjoy the summer months in peace.
Although the phrase carries a peculiar heritage, it remains somewhat relevant today. Generally, equities tend to print seasonally weaker performances between May and October. Of course, that’s not a hard and fast rule. However, under the present circumstances of stubborn inflation, geopolitical flashpoints, and recessionary fears, it might not be a bad idea to consider stocks to sell in May.
To be 100% clear, you shouldn’t dump your winners or enterprises poised to run higher. However, given that we’re headed toward weakness upon weakness (seasonality trends combined with current headwinds), cynicism may be prudent. Below are the stocks to sell in May.
Dish Network (DISH)
To be completely upfront, Dish Network (NASDAQ:DISH) might not rank as an immediate name for stocks to sell in May. That’s because according to Deadline, Dish might pursue strategic transactions. If so, whatever management decides might positively resonate with the market. Under this scenario, it’s possible that DISH could fly higher.
Another reason why I hesitate to label DISH as one of the stocks to sell in May centers on contrarianism. Specifically, Fintel points out that DISH’s short interest is 20.24% of its float. Also, its off-exchange short volume ratio hit 62.98%. Therefore, it’s possible for DISH to dramatically swing higher.
Unfortunately, investors should also be aware that the security lost 54% of market value since the January opener. In the past 365 days, it’s down nearly 70%. Interestingly, investment resource Gurufocus labels DISH as a possible value trap. Sure, it trades at an earnings multiple of 1.98. That’s not necessarily a good thing, though, as it might speak to fading demand.
Big 5 Sporting Goods (BGFV)
Back during the worst of the Covid-19 crisis, Big 5 Sporting Goods (NASDAQ:BGFV) was one of the top ideas to buy. Basically, people feared social unrest during the pandemic – a not entirely unjustified concern. As data published by the National Institutes of Health pointed out, millions of Americans became new gun owners. Well, Big 5 represents one of the few publicly traded retailers that sell firearms.
However, with fears of Covid-19 fading rapidly into the rearview mirror, the intensity of firearm purchases likewise lessened. Therefore, Big 5 has become what it used to be just before the pandemic: a company that takes up space anonymously at your local strip mall.
I don’t want to be dismissive because Big 5 serves the outdoor sporting community. While Covid may have temporarily changed matters, generally speaking, demand for outdoor recreation has been declining. In the trailing year, shares tumbled nearly 45%. That might be a sign that BGFV sits among the stocks to sell in May.
CoreCivic (CXW)
A troubled enterprise, private prison company CoreCivic (NYSE:CXW) hasn’t been performing well over the years. Don’t expect much sympathy. In the past 365 days, CXW lost nearly 25% of its equity value. Over the past five years, shares stumbled to the tune of almost 57%. Since the Jan. opener, CXW is on the cusp of falling 23%. However, a cynical tailwind may be here.
Specifically, the expiration of the Trump-era Title 42 – which used the Covid-19 crisis to essentially close the southern border – presents an “opportunity” for CoreCivic. With so many desperate migrants flooding into the U.S., demand might rise for the corrections facility.
However, it would be odd for Title 42 to expire, only to usher in the return of questionable migrant-processing procedures. Indeed, one report showed a U.S. military servicemember letting in a group of migrants. In other words, the cynical narrative of CXW might not pan out. Right now, the market doesn’t seem enthused about the thesis. Therefore, it might be one of the stocks to sell.
Lyft (LYFT)
When I mentioned Lyft (NASDAQ:LYFT) in a story about stocks to sell in May, bear in mind that I’m not hating on the company. In my personal life, I’ve used Lyft several times, which provides an alternative to rival platform Uber (NYSE:UBER). However, Lyft may have a credibility problem. To be fair, neither enterprise represents sterling examples of financial health. However, Lyft may end up getting lost in the competition.
Basically, Uber approaches the sharing economy with gusto, expanding its footprint both domestically and internationally. Therefore, app users can build a robust digital reputation with one platform almost everywhere. In contrast, Lyft’s relatively limited profile encourages app-hopping.
What’s more, as Uber eats more market share, this action will likely diminish Lyft’s total addressable market. At a time when consumer-facing businesses struggle for traction, the loss of shares presents a worrying dilemma. Also, Lyft sadly suffers from poor fiscal health. For example, its Altman Z-Score sits at 3.02 below zero, indicating deep distress and a high risk of bankruptcy.
Bank of Hawaii (BOH)
While Hawaii offers travelers an island paradise to explore, Bank of Hawaii (NYSE:BOH) symbolizes financial perdition. Broadly, the banking crisis isn’t over, declared the AP. Instead, it’s a matter of how bad circumstances will get before we recover. That’s not exactly an encouraging concept. Nevertheless, with the failure of three regional banks, you can’t take any chances with struggling regional players like BOH.
In the past five sessions ending May 16, BOH stumbled nearly 17%. In the trailing one-month period, it’s down almost 32%. And since the start of this year, BOH printed a loss of 55% of equity value. On a technical note, the rapid erosion of value combined with an inability of BOH to create a baseline support zone poses a heavy risk.
Another factor to consider is that throughout the banking crisis, the government made one thing very clear: Uncle Sam will protect depositors, not shareholders. However, if more and more banks continue to fail, the ugly reality is that the government can’t bail out everyone. With such steep risks involved, BOH ranks among the stocks to sell in May.
Mullen Automotive (MULN)
A favorite among retail speculators, Mullen Automotive (NASDAQ:MULN) certainly represents a tenacious enterprise. As well, Mullen CEO David Michery has a similar gift of charm as former President Donald Trump. Lesser executives may have crumbled under the pressure as Mullen navigates myriad challenges. However, Michery and the company keep firing away – and speculators keep buying.
Unfortunately, I’m not sure if charm and the occasional positive press release are enough to keep MULN stock afloat. Listen, I get that per Fintel data, MULN has a short interest of 305.25% of its float. In addition, its short interest ratio clocks in at 25.98 days to cover. Further, Fintel notes that it’s one of the most heavily shorted securities in the market today.
I get it. At the same time, there’s a reason why many other investors don’t appreciate Mullen. For all the charm and charisma, the electric vehicle manufacturer lacks revenue. It also suffers red ink for free cash flow, imposing viability concerns. Finally, with a loss of nearly 85% since the January opener, MULN appears to be one of the stocks to sell.
Blue Apron (APRN)
Following the close of the May 16 session, shares of embattled meal-kit provider Blue Apron (NYSE:APRN) popped up over 25%. According to MarketWatch, APRN soared on news of a deal transferring infrastructure technology to another company. In turn, this arrangement allows Blue Apron to shift to an asset-light model, focusing on a path to profitability. While it’s good to hope for the best, APRN might be one of the stocks to sell.
Again, I understand it’s a risky proposition to dump APRN. Per Fintel, the short interest of APRN hit 15.13% of its float. Also, its off-exchange short volume ratio reached 59.34%. Also, the investment resource points out that APRN ranks among the most shorted securities (though obviously not to the same degree as Mullen Automotive).
Nevertheless, with The Wall Street Journal reporting that the return of the office has stalled, plenty of white-collar households command a key luxury: time. Sadly, this dynamic cuts into Blue Apron’s selling point, which is that it offers healthy meals conveniently. Combined with negative sales growth and a scarlet-splattered net margin, APRN is one of the stocks to sell in May.
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.