Time to sell
In a remarkably resilient market, “sell” recommendations can be dicey. Still, consider parting ways with these stocks.
Harley-Davidson (HOG) makes beautiful, high-quality machines, but its baby boomer customers are “getting too old to ride motorcycles,” said Mitch Rubin, manager of RiverPark Long/Short Opportunity Fund. The pricey bikes are hardly essential purchases, a handicap during uncertain economic times. And a glut of used Hogs on the market is hurting demand for new bikes. A new CEO plans to cut costs and streamline the business, Rubin said, but that won’t increase the pool of Harley riders, which is crucial to reviving sales long term.
National Oilwell Varco (NOV), which makes components and tools used in oil and gas drilling and production, should benefit from producers looking to increase efficiencies during tough times. But despite better-than-expected results for the most recent quarter, “positive traction will be hard to maintain over the next 12 months,” according to CFRA. At the end of October, the firm lowered its 12-month target price for National Oilwell shares and slapped a “sell” rating on the stock.
Nielsen Holdings’ (NLSN) ratings used to be vital to television programming and advertising decisions. But TV ad sales are in decline and fewer people are watching. Instead, they stream digital content on mobile devices. Streaming companies don’t need Nielsen; they can track viewing trends on their own. Sales and earnings have been flat in recent years. And Nielsen is loaded with $7.3 billion of long-term debt and $2.5 billion in short-term liabilities; its cash hoard is under $500 million. “It has way too much debt and little possibility of growth,” RiverPark’s Rubin said.
Simon Property Group (SPG), long a best-in-class shopping center real estate investment trust, is on the wrong side of current trends. Already beset with store closures in its malls, Simon was wrecked by the pandemic. And it has recently made some questionable moves, such as agreeing in early 2020 to buy luxury mall owner Taubman Centers. By June, it wanted out. Now the two are duking it out in court.
The Taubman fight will weigh on shares, and post-COVID shopping behavior may accelerate store closures, say CFRA analysts, who rate the stock a “sell.”
Snap-On (SNA) makes and distributes hand tools, storage units and equipment for professional mechanics. Rising debt among the company’s franchisees is constraining growth, according to UBS Securities, which rates the stock a “sell.” Snap-On extends credit to franchisees and to the technicians who use the company’s tools and equipment. Tool sales have largely moved sideways since 2015, says UBS, but the firm’s financing portfolio has ballooned 36%.