Selling certain stocks now is recommended even though conditions are improving for the stock market.
For 2023’s first half, the benchmark S&P 500 Index gained 16%. The technology-laden Nasdaq Index increased 33%, its best first half performance since 1983. While tech stocks have led the year-to-date rally, especially artificial intelligence (AI) stocks, the rally is starting to broaden to include other sectors and asset classes. With the U.S. Federal Reserve nearing the end of its interest rate hikes and the economy showing signs of resilience, many analysts and economists are predicting that the rally will continue in the year’s second half.
With that in mind, investors should continue to be mindful of certain stocks. Selling for a variety of reasons, including a stock’s poor financial performance or simply to take a profit, is both reasonable and prudent. Here are three such stocks to sell in July.
Apple (NASDAQ:AAPL) remains a strong company and stock to own. Yet, AAPL stock has achieved several significant milestones lately that may make it wise for shareholders to take profits in July. First, Apple has achieved a $3 trillion market capitalization following a blistering 55% gain in its share price over the last six months. This makes Apple the most valuable publicly-traded company in the world. Second, AAPL stock is now sitting at an all-time high.
Can the run in AAPL stock continue? Possibly. But history shows that stocks often pull back and consolidate after a big rally. For this reason, shareholders might, at a minimum, want to trim their position in Apple stock and take some profits off the table. Additionally, the median price target on the stock among 39 analysts who cover the company is 2% below where the share price currently sits. This suggests that Apple has become slightly overstretched. Don’t be surprised to see the stock stall or decline in coming weeks as a result.
Formally known as the Metropolitan Life Insurance Company, Metlife (NYSE:MET) is a leading provider of life insurance policies and employee benefit programs. However, MET stock appears to be on life support lately, having declined 22% year to date and nearly 30% below its 52-week high. The stock is struggling following a shockingly bad first quarter for the company. Metlife reported Q1 net income of only $14 million, compared to $1.6 billion earned a year earlier.
Metlife’s earnings per share in Q1 came in at $1.52, down 30% year over year. Among Wall Street analysts, it was 18% below the consensus forecast of $1.85 a share. The quarter was astonishingly bad. The company blamed the poor results on a 53% decline in profits for its business in Asia. They also sited a $684 million net loss on its invested premiums due to the sharp downturn in global stock markets last year. While we could see a turnaround in coming quarters, especially with stock markets rising, MET stock is one to consider selling in the near-term.
U.S. Bancorp (USB)
Optics are improving for bank stocks with news that the largest U.S. lenders successfully passed their latest stress tests. They appear well-positioned to weather a severe economic downturn. However, some factors about U.S. Bancorp (NYSE:USB) set it apart from other bank securities which should give investors and shareholders pause. The fifth biggest bank in North America by assets, U.S. Bancorp’s stock is down 30% in the last 12 months, including a 25% decline this year. In the past five years, the share price is down 34%.
USB stock badly trails the long-term performance of its peers. The first reason is that U.S. Bancorp is a regional bank in the truest sense of the term. Headquartered in Minneapolis, its business is almost exclusively concentrated in the country’s Midwest. Secondly, U.S. Bancorp is less diversified than other large American banks, with virtually no overseas presence. Finally, the bank is particularly sensitive to an economic slowdown. The lender’s CEO Andy Cecere recently forecast a ‘moderate recession’ for a short period, citing that U.S. Bancorp is seeing a drop in loan demand in the second quarter compared to a year earlier.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.