4 Stocks To Sell Today … { August 2019 }


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Stocks to Sell in August 2019 …


1 – Starbucks (SBUX)

Shares of global coffee retail giant Starbucks have sprinted to all-time highs ahead of the company’s next earnings report, and the stock now trades at a multi-year high 28-times forward earnings multiple.

There are few things wrong with this. First, Starbucks continues to suffer from traffic declines. Second, competitive pressures in the U.S. are only building with McDonald’s continuing to jump more aggressively into the breakfast drinks and snacks category, and indie coffee shops continuing to pop up everywhere.

Third, Starbucks has a bunch of exposure in China, and China’s economy just reported its slowest quarterly GDP growth in nearly 30 years. Fourth, Luckin Coffee is rapidly expanding in China, and Starbucks’ growth trend in that country will be adversely impacted as a result of Luckin’s expansion.

All in all, then, there are ton of headwinds in the SBUX growth narrative. Yet, the market has ignored those headwinds, and this stock trades at an all-time high with a rich valuation ahead of Q2 earnings. That combination broadly implies that SBUX stock could be due for a big pullback this summer.


2 – Yelp (YELP)

Restaurant and services reviews platform Yelp reported ugly first quarter numbers back in May which comprised decelerating ad business growth. Investors freaked out in response, and YELP stock plummeted from $40 to $30 in a matter of days.

YELP stock has since rebounded, and now trades around $35. But, that’s mostly because of broader market strength than anything Yelp-specific… If the Q2 numbers look like the Q1 numbers (which is the most likely outcome), then you could get another big post-earnings plunge in YELP stock.


INSIGHTS ›


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3 – J.C. Penney (JCP)

Department stores have been the eyesore of a struggling retail segment for several years now, mostly because these stores are mall-centric and their value props have been eroded by the emergence of all-in-one e-commerce platforms like Amazon. Nothing about this trend has changed recently. Over the past three months, while retail sales are up 3.4%, department store sales are down 5.9%.

Consequently, investors should expect more bad numbers out of department store operators this quarter. In this dour group, J.C. Penney is the consistent worst performer, with negative comparable sales growth, eroding margins, and a huge debt load. As the consistent worst performer in a group that has had a rough past three months, JCP’s second quarter numbers will likely be pretty bad.

Those pretty bad numbers will reinforce the idea that this stock has a very realistic chance of going to zero. If that idea does get reinforced, JCP stock will drop.


4 – Norfolk Southern (NSC)

The U.S. economy is slowing, but it is important to note that there are two parts to the economy. There’s the manufacturing side and the services/consumer side. The services/consumer side has actually remained healthy, given low unemployment rates, strong wage gains, and healthy retail sales growth. But, the manufacturing side has been very weak, and some say that the U.S. manufacturing industry in in recession territory.

That’s not good news for rail transportation giant Norfolk Southern (NYSE:NSC). When times are good in the manufacturing world, times are also good in the rail transport world, and Norfolk reports strong numbers. The opposite is true, too. That’s why rail transport peer CSX (NYSE:CSX) recently reported ugly quarterly numbers. It’s also why Norfolk Southern is set to report similarly ugly quarterly numbers towards the end of July.



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Categories: Insights, Stocks To Sell Today

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