The stock rally doesn’t seem to have an end in sight. New vaccines and a new stimulus package are on their way, and after a bumpy first quarter due to rising Covid-19 numbers, most investors see 2021 as a better year for stocks than 2020. And that may be true for some sectors and particular stocks, but it’s not true for the broad market. As such, investors may want to look at these stocks to sell in the new year.
There are plenty of weak companies and sick sectors. This new year will be survival of the fittest. Also remember that many analysts are predicting rising earnings throughout 2021. Much of the recent rally is based on this. If it doesn’t happen, woe be to the stocks that punch a hole in the bubble of optimism.
The eight stocks to sell for January are companies that are having a hard time in sectors that aren’t exactly shining. Some are big names. Some are names that will likely fade into history if things don’t improve. Either way, stay away from these eight stocks to sell:
- Carnival Corp (NYSE:CCL)
- ConocoPhillips (NYSE:COP)
- Equity Residential (NYSE:EQR)
- Host Hotels & Resorts (NYSE:HST)
- Las Vegas Sands (NYSE:LVS)
- AT&T (NYSE:T)
- United Airlines Holdings (NYSE:UAL)
- Creditcorp Ltd (NYSE:BAP)
Stocks to Sell: Carnival Corp (CCL)
The cruise industry has been undergoing a consolidation for decades now. Much of it was about building economy of scale and trying to anticipate the graying of major markets in the U.S., Europe and Asia.
It also saw opportunity in catering to younger demographics as well. In this increasingly digital world, having a huge cruise ship to mix and mingle is a very attractive alternative to sitting in a café swiping left.
But then the pandemic hit.
Cruise ships were then perceived as slow-moving petri dishes for the virus. Previously food poisoning and Legionnaires disease had been public relations challenges, but Covid-19 laid them low.
As one of the biggest players in the industry, CCL is now one of the biggest victims of the virus. And given the new strain that has been discovered, the industry isn’t rebounding anytime soon.
This integrated oil and natural gas (and bitumen) company is one of the biggest in the world. But that size and diversity is no match for a lack of demand in its fossil-fuel products.
While U.S. spending may be decent, the economy isn’t exactly operating without massive financial support from the government. That means lower demand.
Add to that the fact that ESG investing is driving huge divestments from fossil fuels and into renewable and green fuel companies. Retail and institutional investing is moving away from these big companies, and this time around, it might not ever come back.
No doubt that COP still provides a solid 4.35% dividend yield, but when the stock is off 38.55% in the past year, that dividend is meaningless. ConocoPhillips may find natural gas and its pipelines a saving grace, but it won’t turn the business around.
Equity Residential (EQR)
The current conditions are very promising for some real estate investment trusts (REITs). But EQR isn’t one of them.
This REIT specializes in apartment rentals in most of the major U.S. cities. Traditionally, this has been a great market, since prices and demand stay high due to people wanting to be close to their jobs and live in a bustling urban environment.
But the pandemic has changed all that.
Now big cities are like cruise ships that don’t move. People are working from home and looking to get out of population-dense places. And given the unemployment rate, many have to move for simply economic reasons.
There’s little that is going to help rejuvenate business for EQR soon. And if the work-from-home trends continue, occupancy rates may trend down for some time to come.
Host Hotels & Resorts (HST)
Next on my list of stocks to sell is Host Hotels & Resorts. If you’ve ever stayed at an upscale hotel under the banner of a major hotel chain in a major city or resort location, it was likely operated by this company.
HST has 79 hotels in North and South America that it operates for major brands. Host is an REIT that manages the operations of these niche properties.
The trouble is that travel is down and looks like it’s going to be a depressed market for a while. Most of Europe is shutting down again, so tourism isn’t doing well. China is seeing some flare-ups, and the U.S. is in serious shape.
Again, big places where people gather isn’t exactly on top of anyone’s agenda right now, so HST is not exactly thriving. The stock is off 22% in the past year, but 2021 doesn’t look like a big rebound year, especially as other smaller alternatives are available.
Las Vegas Sands (LVS)
One of the shining beacons of U.S. consumerism is Las Vegas. In Asia, its corollary is Macau. And growing quickly is Singapore. LVS has casino and resort operations in all three places.
The trouble is, with the pandemic, all these locations have taken a big hit in business both at the gaming tables as well as the occupancy rates. Remember, gaming is just part of the experience in going to these glitzy locations. There are a lot of places to spend your money.
But if fewer people are spending big and fewer people are showing up, that’s not good for business. After all, these massive buildings take a lot of money to run.
LVS isn’t going away, but this isn’t the time to be bottom-fishing it. It’s definitely a stock to sell for now.
The former Ma Bell is still a force in telecom, both in the U.S. and beyond. But the fact is, its former glory days have had a negative effect on how it runs the business today.
Former monopolies cling to some of the secret sauce that got them there. Yet in the dynamic, wide-open market that we have today in telecommunications, the Old Guard has a tough time keeping up.
AT&T saw that being one of the top two mobile carriers in the U.S. wasn’t going to fuel growth moving forward, especially as competition from rivals heated up and margins got tighter. It thought a move into streaming services was a good idea.
So, a couple years ago it bought Time Warner for $85 billion. But this isn’t a plug-and-play acquisition. And the most recent example of troubles is the rollout of HBO Max. It launched without deals with two of the nation’s largest streaming services and now ends 2020 weaker for it. Plus, it also announced that it’s launching its top releases on HBO Max as well as in theaters in 2021, infuriating the film industry.
And this says nothing about its mobile business, which is exposed to customers having trouble paying bills. The stock is off 24% this year, so its 7.3% dividend yield isn’t really tempting.
United Airlines Holdings (UAL)
The airline industry is one of the worst hit sectors in the markets. This is usually the case when the economy is bad. They are very cyclical, so their ups and downs aren’t especially surprising.
The problem now is the pandemic. Significantly fewer people are flying for business or pleasure. And with numbers continuing to rise in the U.S., Europe and South America, that isn’t going to change soon. The trouble is, this business is all about volume, making money on razor-thin margins.
As we have seen over the years, even airlines operating at decent rates haven’t been able to survive. Today, no one is doing well. And this time around, the sector’s cyclical nature isn’t a reason to buy low and play a rebound. Even the recent bailout was a blip on UAL’s price chart.
Off more than 50% in the past year, stay away from this stock and the industry in general for now.
Credicorp Ltd (BAP)
This stock may not pop up on your bottom-fishing wish list like AT&T or United Airlines, but Credicorp is an interesting financial stock for those with an eye toward global growth. It’s an investment bank that finances everything from microloans to major development projects around South America, particularly in Peru, Bolivia, Chile and Colombia.
What’s more, all these nations have deep ties to U.S. industries and the U.S. market.
But the pandemic has not helped many of these countries’ economies, since they are dependent on trade with the U.S. and other Latin American partners. With Brazil and Argentine economies barley surviving, their trading partners in the region can feel the effects. And that hurts BAP.
Long-term, emerging markets will be very attractive, but now they’re in a downcycle and lower lows are likely. Even BAP’s 5.6% dividend yield doesn’t help its 28% 12-month loss. And even after this loss, the stock is still trading at a price-to-earnings (P/E) ratio of 72. To start off 2021, it’s one of my picks for stocks to sell.