9 stocks to sell ahead of earnings

They've had a good run, but you'd be wise to trim your positions in these sell-rated companies before they report quarterly results next week.

By TheStreet Staff Jul 16, 2013 11:57AM

thestreet logoTrading floor (© Digital Vision Ltd./SuperStock)By Richard Suttmeier

 

Among the waves of companies that report quarterly results next week, the nine I am profiling in this post are rated "sell" according to ValuEngine. Investors should consider booking profits on these stocks before earnings.

 

The stock market has clearly become a momentum game fueled by the notion that shares will continue to move higher as long as Federal Reserve Chief Ben Bernanke continues his quantitative easing policy in the form of QE3 and QE4. In a momentum market, stock-specific fundamentals tend to be ignored. Buying on weakness has been the chosen strategy even after an earnings miss or weaker than expected guidance. I guess the bet is that QE3 and QE4 will cure the ills of even the "sell" rated companies.

 

I say that buyers should be beware as 75.3% of all stocks are overvalued, and 42.2% are overvalued by 20% or more, including four on today's list. Eight of the nine stocks are overvalued. All have "sell" ratings and all are trading higher than they did 12 months ago. Four have gained more than 58.9% with one up by more than 250%. All are projected to be lower in 12 months. Seven of nine are above their 200-day simple moving averages.

 

My suggested allocation to the stock market is to have a maximum of 50% of your stock investment dollars in the market. If you have not taken gains in this environment, and own any of the stocks in today's list consider reducing your positions before these companies report earnings between July 23 and July 25.

table sell rated stocks
Reading the table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

 

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

 

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

 

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

 

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

 

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

 

Risky Level: Price at which to enter a GTC limit order to sell on strength.

 

DuPont (DD) ($54.63) set a multi-year high at $57.25 on May 31 and weakness since then has stayed above $52.00. My weekly value level is $52.22 with my monthly pivot at $55.02 and semiannual risky level at $61.73.

 

Ford Motor (F) ($17.12) set a multi-year high at $17.29 on July 15 after being as low as $14.30 on June 24. My weekly value level is $16.69 with a semiannual risky level at $19.46.

 

Landstar System (LSTR) ($53.05) set a multi-year high at $59.97 back on Jan. 28. The stock has been trading back and forth around its 200-day SMA since May 29 with a low of $50.39 on June 26. My annual value level is $50.52 with a semiannual pivot at $51.52 and a quarterly risky level at $55.02.

 

Norfolk Southern (NSC) ($75.63) set a multi-year high at $81.00 on May 21 as the transportation average set its all time high. The stock traded as low as $70.27 on June 24 staying above its 200-day SMA. My weekly value level is $70.01 with a pivot at $75.90 and a semiannual risky level at $77.40. The annual pivot has been a magnet since the end of March.

 

Old Dominion (ODFL) ($44.30) set a multi-year high at $44.73 on July 11. My monthly value level is $42.86 with a weekly risky level at $44.96.

 

Ryder Systems (R) ($61.37) set a multi-year high at $64.68 on May 21 and traded as low as $58.36 on June 24. My annual value level is $59.74 with a weekly pivot at $60.52 and monthly risky level at $68.75.

 

Tesla Motors (TSLA) ($127.26) set a multi-year high at $133.25 on July 15. This is one of the most speculative stocks in the market today. Tesla is 111% overvalued without a price-to-earnings ratio. The daily chart has gone parabolic like the stocks in the March 2000 tech bubble. My monthly value level is $92.84 with a weekly pivot at $127.16, which was tested at Monday's low.

 

United Parcel Service (UPS) ($85.48) set a multi-year high at $91.78 on July 11, and then issued an earnings warning and lower guidance. The high was a test of my monthly risky level at $91.06, where investors could have booked solid gains. This week's value level is $83.90.

 

USG (USG) ($25.81) set its multi-year high at $30.97 back on Feb. 13. The stock traded to a 2013 low at $21.35 on June 24. The building materials company has a semiannual value level at $25.64 with a monthly pivot at $26.27 and monthly risky level at $31.83.

 

At the time of publication the author held no positions in any of the stocks mentioned.

 

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1Comment
Jul 16, 2013 6:47PM
avatar

Richard....Nice to know when the plane has already crashed...

Looks like this came out about noon; Ford(F) was or had been downgraded...ALREADY..

The 50+ cent share loss today, sure isn't going to be covered by the GD dime in dividend later.

 

Where's the Horse?....Duh, I dunno I think I saw him run over the hill early this morning? Duh !

Was it that Mustang?...Duh, I think so, not really sure...??

The Barn is empty...!!   Yup, think you're right.

 

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