3 Ticking Time Bombs in Your Portfolio to Sell Now
Identifying potential risks in your portfolio is crucial for long-term success. As of July 2024, several stocks exhibit significant warning signs suggesting they might be stocks to sell now.
Regular portfolio reviews are critical to ensuring that the investment strategy remains aligned with financial goals and market conditions. This includes reassessing the performance of individual assets and the overall portfolio composition. Regular reviews help make timely adjustments, such as rebalancing the portfolio to maintain the desired asset allocationand removing potentially undesirable companies.
Some of these stocks to sell now were once great companies but have fallen from grace. I recommend taking action on these stocks to sell now due to their lack of competitive advantages and unattractive risk-to-return profiles.
Altria (MO)
Altria (NYSE:MO) faces ongoing regulatory pressures and declining cigarette sales in the U.S. Despite efforts to diversify through investments in e-cigarettes and cannabis, the company’s future growth remains uncertain amid increasing health concerns and regulatory scrutiny.
While MO may appear attractive to income-focused investors due to its high dividend yield of 8.9%, several factors present a bear case for selling one of these stocks now.
Altria operates in the tobacco industry, which faces a long-term secular decline in sales. This trend shows no signs of abating, as evidenced by the company’s first-quarter results, which saw revenue decline by 2.5% year-over-year. Also, Altria’s valuation, despite appearing attractive with a price-earnings ratio of 9x, may not fully reflect the risks associated with the company’s business model. The modest valuation is primarily due to the industry’s declining prospects.
Additionally, Altria’s balance sheet raises some concerns. The company has a net debt position of $21.43 billion, or $12.48 per share, which could limit its financial flexibility and ability to invest in growth initiatives or weather any further industry headwinds.
AT&T (T)
AT&T (NYSE:T) has accumulated substantial debt, primarily due to its acquisitions of Time Warner and DirecTV. High debt levels increase financial risk, especially in a rising interest rate environment.
Furthermore, some analysts believe that DirecTV and Time Warner’s acquisitions have not delivered the expected synergies and growth.
AT&T’s revenue growth has also been sluggish in recent years, with analysts projecting a modest 5-year revenue growth rate of 1.73%. This slow growth may be due to the mature nature of the telecommunications industry and the company’s heavy reliance on its traditional wireless and wireline businesses.
While AT&T offers an attractive dividend yield of 5.94%, the sustainability of this dividend may come into question. The company’s payout ratio of 59.68% suggests that a significant portion of its earnings is being used to fund the dividend, and there may also be little growth to be had for it in the future.
Verizon (VZ)
Verizon’s (NYSE:VZ) core wireless business is mature, and the company is experiencing slowing subscriber growth. The saturated U.S. market limits the potential for significant organic growth in its primary revenue stream.
Also, Verizon has a significant amount of debt on its balance sheet, with a net debt position of $173.27 billion, or $41.16 per share. The company’s debt-to-equity ratio of 1.86 and debt-to-EBITDA ratio of 4.42 suggest that servicing this debt could be a challenge, especially if the company’s cash flows deteriorate.
Verizon’s revenue growth has been sluggish in recent years, with analysts projecting a modest 5-year revenue growth rate of 2.10%. This slow growth may be due to the telecommunications industry’s mature nature.
If VZ’s dividend gets cut, it may spell doom for the company, as many investors believe its dividend is the best or perhaps one of the only reasons to consider investing in VZ.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
