Always an uncomfortable topic, the controversial tagline of stocks to sell generates a range of human emotions. At the same time, this is a necessary conversation. Fundamentally, success in the market is about knowing when to buy and when to sell.
Just watch a baseball game. On rare occasions in the modern game, a starting pitcher can go all nine innings. Most of the time, however, the manager must go to the bullpen and bring up a reliever. Even if the starter objects, you as the manager must make the difficult decisions. So it is with stocks to sell.
However, within this category sits a subsegment: stocks to sell because they might not rise again if we suffer a severe downturn. Of course, I’m not going to guarantee anything. Still, as a general principle, you should keep close tabs on these risky enterprises.
Stocks to Sell: Bank of Hawaii (BOH)
I love Hawaii and the great people of Hawaii – that’s not part of this discussion whatsoever. However, not everything about the island paradise is so heavenly. For investors, they might want to steer clear of Bank of Hawaii (NYSE:BOH). Mainly, the regional banking crisis did a number on vulnerable financial firms, making them stocks to sell. With BOH in particular, it lost more than 37% of its equity value since the January opener.
But it’s not just about the ugly price chart. Financially, the Bank of Hawaii appears suspect because of its net interest income of $124.3 million in the second quarter. That’s a loss of 6.5%, which clashes with both big banks and the regional players. Basically, in a high-interest rate environment, competing financial firms saw a significant rise in net interest income.
A global multi-level marketing corporation, Herbalife (NYSE:HLF) develops and sells dietary supplements. Understandably, Herbalife has attracted myriad criticisms, with many folks labeling its “nutrition clubs” a scam. It’s a tricky area because technically, MLMs are legal enterprises. However, the methods such organizations deploy generate controversy.
Basically, Herbalife makes money both from the underlying supplements and from recruiting people or downlines. The problem here is that there are only so many people available to recruit, meaning that the top beneficiaries of MLMs stand at the very top. Everyone else struggles to make ends meet. Unfortunately for Herbalife shareholders, folks might start wising up to the unsustainable nature of MLMs. Also, in a downturn, supplements run the risk of the trade-down effect as competition can come in and offer a cheaper, diluted alternative. Looking at its financials, Herbalife has been suffering top-line erosion since 2021.
Lastly, analysts rate HLF a moderate sell with a price target implying less than 4% upside.
In all honesty, WeWork (NYSE:WE) may be the least-controversial idea for stocks to sell. From the get-go, its path into the capital market has been ignominious. Notably, in 2019, The New York Times reported that WeWork shelved its original plan to launch an initial public offering (IPO). Back then, investors grew increasingly concerned about the company’s losses. As well, red flags started to pop up regarding its corporate governance.
Later, in 2021, WeWork finally managed to go public at a much-reduced valuation. Unfortunately, as Reuters pointed out a few months ago in August, the company never turned a profit. That left many declaring that WE represented one of the most overhyped startups in recent memory. With endorsements like that, it’s no wonder WE ranks among the stocks to sell.
Simply put, it’s on life support. Since the beginning of this year, WeWork lost nearly 95% of its equity value. Sadly, the underlying coworking space hasn’t been lucrative, in part because of the Covid-19 impact. Only one analyst covers WE, a lone hold with no price target.
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.