The beginning of a new month, and a new earnings season gets investors thinking about which stocks to buy. They’ll also be thinking about which stocks to sell, which should include these seven blue-chip stocks to sell immediately. After all, knowing when to sell a stock is an important lesson every investor has to learn. Granted, some of us learn that lesson the hard way. But it’s an essential trading quality of a solid investor. That being said, let’s jump into these seven blue-chip stocks to sell.
With biopharmaceutical companies such as Pfizer (NYSE:PFE), new drug development can be a double-edged sword. In late June, Pfizer announced it was ending its clinical development of lotiglipron for the treatment of obesity and Type 2 diabetes. Not surprisingly, shares of PFE stock dropped sharply following the announcement. As of July 6, 2023, the stock is down 6.9% and is now testing its 52-week low. The sell-off also nearly erases all the gains the stock made since selling off in May.
In addition, Pfizer is waiting for approval of its $43 billion offer to buy Seagen (NASDAQ:SEGN). Even if the deal is approved (which still seems likely), the payoff for this investment will be years away. The long-term outlook for Pfizer still seems bright if you’re willing to take a long position. If you’re a trader with a shorter outlook, selling rather than buying PFE stock seems like the better strategy.
Alcoa (NYSE:AA) makes this list of blue-chip stocks to sell because of the current state of the aluminum market. If you’re investing in companies that to commodities, you know that the stock price is based on supply and demand for the underlying commodity.
After rocketing higher in 2021, aluminum prices have leveled off and are likely to stay that way through 2023. After soaring to a closing price of over $90 per share in May 2022, AA stock has fallen 64%. The company is facing revenue that is declining on a year-over-year basis with earnings that have turned negative.
That’s likely one reason that Carlos De Alba, an analyst at Morgan Stanley (NYSE:MS), downgraded AA stock in late June. De Alba cited what he suspects is a material downside to consensus price targets and believes the stock will continue to fall as it continues to report negative quarterly earnings. Alcoa historically is one of the first stocks to report earnings and it will do so on July 19. Even if the company beats on revenue and earnings, the numbers show a sharp year-over-year decline. Invest accordingly.
Netflix (NASDAQ:NFLX) has been one of the best-performing stocks in the first half of 2023. The streaming giant impressed investors by boosting subscriber numbers. Some of that was due to a crackdown on password sharing. And many of those new subscribers would be on the company’s ad-supported tier.
You can probably sense a “but” coming. And you’d be right. However that “but” comes with a bullish and bearish outlook.
For one, with the stock up 48.5% in 2023, a correction is likely and would probably be welcomed by some investors. On the other hand, there are legitimate questions surrounding “too little visibility” surrounding the company’s underlying business. That was the opinion of Goldman Sachs analyst Eric Sheridan. Sheridan has been one of the harshest critics of Netflix. So even though he is raising his rating on NFLX stock, he only raised it to Neutral, which could mean investors will be taking profits.
Again, knowing when to sell a stock is just as important as knowing when to buy. Hershey’s (NYSE:HSY) stock is down 9.7% since reaching an all-time high at the beginning of May. This may have some investors thinking it’s time to buy that dip. But with earnings coming up at the end of the month, investors may want to see if HSY stock is still a sweet deal.
On the one hand, a significant reason for the recent stock troubles has been insider selling. But insiders sell for many reasons. And the SEC Form 4 filings show that much of this selling was obligatory.
Nevertheless, institutional investors own just over 50% of the company’s shares, which is good, but not great. And analysts give the stock a 6.8% upside from its current level. Plus, HSY stock trades at a forward P/E ratio of around 26x. That’s not obscenely high, but it’s a little concerning at a time when higher prices for commodities and transportation may take a bite out of earnings.
I had Disney (NYSE:DIS) on my list of stocks to sell in June and it’s one of two stocks that merit an encore performance. Disney was trading near pandemic lows in December. But DIS stock was one of the strongest performers in January 2023.
However, in a familiar story, the gains didn’t last. And today Disney is once again trading near pandemic lows. To be fair, Disney isn’t putting its head in the sand. The company is taking aggressive cost-cutting measures. For example, you don’t have to be a sports fan to have heard about the significant layoffs befalling ESPN, the sports and entertainment network owned by Disney.
That being said, to put a twist on a sports metaphor, investing in playing defense doesn’t win championships – or shareholder confidence. Disney+, the company’s streaming business, is expected to start benefiting as those initial “free” memberships start turning into high-margin revenue. However, the company lost four million subscribers in the company’s most recent quarter.
And if the economy does slip into the much-ballyhooed recession, that would be bearish for the company’s theme parks. The company is a sum-of-its-part stock. And in a robust economy, that’s a benefit. But a company can’t have it both ways. Without clarity on the direction of the economy, DIS stock is likely to go nowhere fast, particularly without a dividend to keep shareholders interested.
Anheuser-Busch (NYSE:BUD) is the second stock making a return appearance on my list of blue-chip stocks to sell. Having kids of a certain age, I hear the words, “say less,” a lot. But I did some sleuthing and found out that the expression means more than just “I understand.” It can also mean doing more rather than just talking about doing things.
That leads me to the problems bedeviling Anheuser-Busch. The company’s Bud Light brand continues to report declining sales. The latest news is that factory workers at glass bottle suppliers are losing their jobs as production lines are shut down.
As the controversy enters its fourth month, the company continues to respond with what seems like a new marketing campaign every week. So far, none really seem to be hitting the mark. Instead, it seems the more they keep “messaging” the more pressure goes on the stock. I wrote in May that as long as Bud Light remains the official light beer of the National Football League, the company will eventually weather this storm. But in July, shareholders are likely to be telling the company it should have said less.
3M (NYSE:MMM) is still mired in lawsuits. One involves earplugs used by the U.S. military and another involves the company’s use of “forever chemicals.” The company has reached a resolution to the latter lawsuit. 3M will be paying out $12.5 billion over the next several years. Chalk that up to the known is better than the unknown. But the company has yet to resolve the earplug lawsuit. That gives investors something to chew on.
One way to help mitigate the effect on the company’s earnings would be to cut its dividend. But the company has Dividend King status, and cutting its dividend would undoubtedly turn off many investors. But if the company’s earnings are still under pressure, its stock price, which is already trading at 5-year lows, will suffer as well. It’s a difficult decision. But until investors know one way or the other, MMM is on the list of blue-chip stocks to sell.
On the date of publication, Chris Markoch had a LONG position in PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.