Summertime Blues: 3 Stocks to Sell When It’s Hot Outside
Which stocks should investors sell this summer? This question can be connected to a classic Wall Street phrase — “sell in May and go away” — which suggests that getting out of the market in May and returning in November is a good strategy for investors. Of course, buying and selling the market based on an adage alone isn’t wise. But much analysis has been done on this idea.
Historical evidence shows that, on average, the months from May to October have the weakest performance. But does that mean there is nothing good to invest in during these months? Of course not.
Still, we’ll look at the other side of the equation in this article. Which names shouldn’t you invest in during this period? The worst-performing sectors during the summer months have historically been Consumer Cyclical, Energy and Financials. So, let’s take a look at three stocks in these sectors that investors should avoid amid the heat.
EQT (EQT)
My first pick of the stocks to sell this summer is EQT (NYSE:EQT). This firm is in the energy sector and operates as one of the top natural gas producers in the United States. The firm reportedly sold a daily average of 5.1 billion cubic feet equivalent of natural gas in 2021.
With higher temperatures in the summer, however, natural gas demand plummets during this time of the year. In 2022, for example, natural gas consumption peaked in January and bottomed out in September, at the end of summer. Indeed, September 2022 demand dropped more than 35% from January 2022.
We can see this reality play out in EQT’s earnings. Last year, the company’s EPS dropped from $3.10 in the first quarter of 2023 to a loss of 18 cents in Q2 and a gain of 20 cents in Q3. Although that drop was extreme and also affected by other events, drops in earnings are expected this year as well. Earnings are predicted to drop in Q2 and Q3 of this year before recovering in the fourth quarter.
VF Corporation (VFC)
Sitting within the Consumer Cyclical sector is VF Corporation (NYSE:VFC) stock, our next pick of the stocks to sell this summer.
VF operates in an industry that often sees decreased demand over the summer. Clothing retailers especially get a significant amount of their business during the winter months. This is also the case for VF Corporation, which owns some of the largest outdoor brands like The North Face and Timberland.
VF Corporation’s fiscal 2024 Form 10-K states that its operating results vary quarter over quarter due to “seasonality.” This primarily affects its outdoor segment. Sales in the outdoor segment more than doubled from fiscal Q1 2024 to fiscal Q2. Indeed, only 15% of the yearly sales occurred in Q1 versus 31% for Q2. With over 50% of VF’s annual revenue coming from it, when the outdoor segment struggles, the performance of VF will follow.
Goldman Sachs (GS)
Our final stock to sell for the summer is Goldman Sachs (NYSE:GS). This firm is in the financial services sector and operates as one of the world’s largest investment banks. It also participates in market-making and investment management services.
Like others on this list, another trend often seen during summer hurts Goldman’s business: The phenomenon of decreased market trading volume. Goldman Sachs, more than other banks, relies on its trading revenue. Reduction in trading volume seen over the summer, then, can negatively affect revenue from this part of the business.
This reduction in trading is due in part to traders simply being on vacation. Indeed, Goldman Sachs’ trading revenue does tend to drop in Q3. Last year, the firm’s trading account income in the third quarter came in at $2.10 billion. That’s roughly 37% of the $5.61 billion reported in Q4, a difference of $3.5 billion for the segment.
On the date of publication, Leo Miller did not hold (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.
