Like many investors, I’m sure you’ll be more than happy to bid adieu to 2022, and to portfolio laggards. In fact, to help get you started, here are several growth stocks to sell. The end of the year is no time to be sentimental. Instead, it’s time to cut your losses and sell stocks that are likely to weigh down your portfolio in New Year 2023.
There are many reasons for investors to sell a stock. Sometimes your thesis for owning a stock has changed. Sometimes a company is still overvalued even after its stock has come down significantly in price. Macroeconomic conditions can also play a role. You’ll see all of those in play in this list of growth stocks to sell. Also, because we know that some investors are still looking for stocks to buy, I’m also giving you one growth stock to consider buying as the calendar turns to 2023.
It wasn’t that long ago that Disney (NYSE:DIS) was on my list of favorite stocks. I saw the company as a “sum of its parts” stock. That was evident during the Covid-19 pandemic. When the company’s theme parks were shut down, the company launched its Disney+ streaming service. That helped bridge the revenue gap and had investors excited for what was to come when the theme parks reopened.
However, with the theme parks reopened, investors can see that the streaming business model has its challenges. That’s been evident in the company’s most recent earnings reports. The theme park business has been shouldering the load. From here, if the U.S. economy continues to weaken, can investors continue to count on Disney’s theme park business to remain robust? Maybe they can. To date, consumers have proven to be more resilient than expected. However, credit card usage among many Americans is climbing and so it’s more likely that consumers will cut back on discretionary trips.
That means it may be some time before Disney is back to firing on all cylinders. Since the company suspended its dividend when the pandemic broke out, investors don’t even have that to count on. You can wish upon a star, but for the time being, a better course of action is to sell DIS stock.
During the pandemic, Clorox (NYSE:CLX) was a “no-brainer” stock. Consumers were flocking to the company’s products in an effort to sanitize their surroundings. Not surprisingly, Clorox posted strong revenue and earnings growth.
In 2022, revenue has held up surprisingly well. But the company’s earnings are down dramatically. And there are other fundamental reasons to believe that CLX stock is a sell. To begin with, the price-to-earnings (P/E) ratio is over 44x, which is significantly higher than the sector average of around 27x.
Clorox continues to cite inflationary pressures that are affecting its labor and logistics costs. This is showing up in the company’s margins which are below the sector average and emphasize the company’s lack of pricing power. That might work out for investors if they could count on the dividend. Clorox currently has a dividend yield of over 3% and has increased its dividend for the last 35 years. But with a payout ratio of over 140%, investors have to be concerned about the dividend aristocrat potentially cutting the dividend.
Beyond Meat (BYND)
Beyond Meat (NASDAQ:BYND) makes this list of growth stocks to sell as it continues to face one obstacle after another. This is not the case against plant-based foods. That trend is here to stay. However, Beyond Meat is discovering that even when it wins, it loses. For example, inflation has increased the price of traditional beef products. This takes away one objection that consumers had to the company’s plant-based products.
However, consumers are scrutinizing every dollar they spend at the store. In many cases, they’re opting for lower-priced protein options, which means avoiding beef altogether. Since Beyond’s products are usually stocked near traditional beef products that’s an opportunity cost lost. Also, the plant-based food space is getting more crowded. Most notably Tyson Foods (NYSE:TSN) is making aggressive moves into the retail space. Beyond Meat’s CEO, Ethan Brown does feel the sector is beginning to enter a consolidation period. But until that happens, BYND stock continues to face a rough road.
Putting FedEx (NYSE:FDX) on this list of growth stocks to sell reminds investors that when a company tells you something, you should believe them. Prior to issuing its third-quarter earnings reports, FedEx pulled its guidance for the year and gave a heads-up that it was going to disappoint on the top and bottom lines.
Sure enough, the company did miss on both counts. And the earnings miss was particularly brutal. The $3.44 EPS was a far cry from the $5.13 that analysts were expecting. Investors punished FDX stock, which dropped about 30%. But the recent bear market rally is restoring the interest of some growth investors. It shouldn’t. Federal Express recently announced it would be laying off an unspecified number of drivers due to lower-than-expected demand. All I can advise is to proceed with caution. Better still, sell the stock on this rally and wait until after the company reports earnings in Dec. to plan your next steps.
J.M. Smucker (SJM)
J.M. Smucker (NYSE:SJM) makes this list for technical reasons. The stock recently sliced below its 50-day moving average. Smucker’s has been outpacing the broader market for the entire year. So it’s noteworthy when the company’s stock is falling when the market is in rally mode.
Investors will no more when the company reports earnings on Nov. 21. But it’s not unusual to see a stock sell-off when analysts expect a negative report. If Smucker’s does post a poor earnings report it would be bucking a string of positive reports. But it could be that the company is finding that it is nearing the end of its pricing power. SJM stock is right around the consensus estimate of analysts. So this move down could be in an effort to give the stock room to move higher after earnings. But with the stock also near the high end of its 52-week range, this may be an opportunity for investors to take some profit.
The cautionary tale for Hanesbrands (NYSE:HBI) is that sometimes stock is cheap for a reason. The company delivered a disappointing earnings report and lowered its guidance. In delivering the news, the company cited lower replenishment orders and order cancellations at key mass retailers. This is particularly concerning because Hanesbrands is known as a brand that fits the budget of low- to middle-income consumers. So when those consumers are staying away, it may signal a larger problem for the stock. Another looming problem for the company is debt that will need to be refinanced. And with interest rates remaining at high levels, that refinancing will be more expensive.
If you’re still not convinced, I’d encourage you to look at the dividend. The payout ratio is around 49%. In better times, that would be sustainable, but if the company can’t reverse course, it’s not unreasonable to believe the dividend may get cut.
Last on this list of growth stocks to sell is fuboTV (NYSE:FUBO). With my background in marketing, I was a fan of fuboTV earlier this year. In fact, I even took a small position in the stock. My reasoning was simple enough. The company was offering a traditional streaming service with a live sports focus. That was already differentiating. But then the company was planning to add an integrated sportsbook. In marketing terms, that’s a unique selling proposition (USP) and it was one that I could see many sports-minded consumers getting behind.
But the company is abandoning its plans to deliver a sportsbook. It doesn’t surprise me. There’s a lot of regulation that would take the company far afield from its traditional streaming business. However, in streamlining the business, investors are left with the streaming business. The streaming model is a tough business to get excited about. And that’s particularly true when fuboTV is not profitable and won’t be for quite some time. It wasn’t a hard decision for me to walk away from the stock, and I suggest that you may want to do the same.
Trade Desk (TTD)
Is this the rally that investors have been waiting for? It’s too early to tell. But even if it’s not, there are some stocks that are still good buys. I put Trade Desk (NASDAQ:TTD) in that category.
Many technology companies that rely on digital advertising for their revenue are posting miserable earnings. One reason for that is because of the “walled garden” approach that these companies take. Simply put, a company like Meta Platforms (NASDAQ:FB) has a financial incentive to steer marketers to advertise on its Facebook platform. The same is true of Alphabet (NASDAQ:GOOG) with YouTube.
The Trade Desk uses a unique cloud-based approach called Unified ID 2.0 that doesn’t force it to steer marketers toward any specific content provider. It’s a model that’s catching on. Digital advertising will be a competitive field, but The Trade Desk will have a seat at the table. TTD stock is currently sitting just below both its 50- and 200-day simple moving averages. If the stock can get above these levels, there could be significant upside ahead.
On the date of publication, Chris Markoch 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.