3 Stocks To Sell Before The Next Meltdown
The major indices keep hitting new all-time highs, and as a trader, that makes life pretty easy. Basically, you have a bullish tailwind at your back that can forgive your loser picks, while at the same time helping your winners move up nicely.#-ad_banner-#
Indeed, in this era of quantitative easing, which is likely to continue based on the Senate testimony last week of Federal Reserve chair nominee Janet Yellen, I think it makes more sense than ever to buy the “air pockets” in this market. Yet there are some stocks that are just a bit too risky here and probably should be sent packing from your portfolio.
I alerted readers to one such stock earlier this month when I said tech giant Cisco Systems (NASDAQ: CSCO) was likely on the downslope. On Thursday, the stock vindicated my call, as it plunged as much as 13.5% after a dreadful earnings report that missed expectations and a warning that next quarter’s revenue would drop 8% to 10% from the same period last year.
In addition to Cisco, there are some other stocks that have performed very well of late that I suspect could be sell-off targets as we head toward the end of the year.
This selling pressure is likely to come from what I’ve called the “performance protection trade,” meaning that hedge funds and professional traders would sell them to beef up their 2013 returns. Other factors could include a rotation out of a hot sector, or possibly a faulty earnings report from a sector bellwether that taints a particular group.
Here are three stocks that I think investors should sell before any potential meltdown:
Facebook (Nasdaq: FB ) |
The social networking site has had a very good 2013, with its shares soaring more than 80% year to date. The company (and its stock) has left its 2012 botched rollout behind, and this year, traders have made FB a great momentum play. Unfortunately, that run might be setting traders up for a meltdown. One investor taking the opportunity to lighten up on his FB shares is tech pioneer Marc Andreessen. According to SEC filings, his venture capital firm Andreessen Horowitz sold 2.28 million FB shares on Nov. 6, at roughly $50 a share. That’s about a third of the investment firm’s holdings, so he isn’t out of the stock completely. However, the move to lighten up on FB may show performance protection thesis at work. Fundamentally speaking, FB now is worried about the potential for ad saturation in its service. Facebook’s chief financial officer suggested as much during the company’s third-quarter earnings call, specifically saying that there might be a limit on how many ads Facebook can serve users before it limits engagement. Given the CFO’s concerns, the sale from at least one big tech investor, and the elevated run in FB shares this year, I think now is the time to sell before any potential meltdown. |
This article was originally published at ProfitableTrading.com
3 Stocks to Sell Before a Potential Meltdown
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