I like buying stocks, not selling stocks -- unless, of course, I am selling them for a big profit.
And while I suspect that this market is headed higher over the next couple of months, and that you should be buying the "air pockets," I also think there are certain stocks that need to be jettisoned from your holdings due to a lack of upside catalysts in the short and/or intermediate term.
One of the stocks I think is headed lower is tech giant Cisco Systems (Nasdaq: CSCO). The network equipment maker has long been a stalwart in the tech space, and I've been buying and selling CSCO shares with very good results since the late 1990s. So far this year, Cisco shares are up 20.5%. Unfortunately, over the past three months, the stock has tumbled more than 11%.
The trouble with CSCO shares started midway through August, which not coincidentally was when the company reported fiscal fourth-quarter earnings. Although it managed to beat earnings expectations, Cisco's sales were less than impressive.
Perhaps more importantly, Cisco announced plans to slash about 5% of its workforce, presumably in an effort to maintain profit margins in the wake of soft sales. The laying off of some 4,000 workers was read as a warning sign by Wall Street. Since that time, CSCO has been downgraded by Credit Suisse and MKM Partners.
Given Cisco's recent sell-off, as well as its softening business, this is one tech stock that you should consider getting rid of.
Another high-profile stock that deserves to be on the chopping block is homebuilder Lennar (NYSE: LEN). Despite very strong earnings in its most-recent quarter that showed EPS jumping 35% year over year and easily besting expectations, the stock has traded poorly.
Fear of a tapering of the Federal Reserve's $85 billion-a-month bond-buying program caused interest rates to rise over the summer, and that's caused many traders to bail out on homebuilder stocks.
LEN is down 11% this year, and though the stock has edged a bit higher over the past two months, there certainly doesn't seem to be any substantive catalysts going forward for this homebuilder's shares. The housing market recovery may not yet be over, but right now, Lennar doesn't seem to be riding that wave.
Fear over the aforementioned Fed tapering and rising interest rates has also hurt the commodities space, as gold and copper prices have come under increased selling pressure.
And that puts Newmont Mining (NYSE: NEM) in a tough spot. As one of the biggest gold and copper miners in the world, Newmont is being hurt by falling gold prices and a lack of demand for copper. Gold prices are in a bear market, and although global growth is taking place, industrial demand for copper has been uncharacteristically soft.
Also plaguing the miner's shares was the recent downgrade of the company's credit rating by rating agency Standard & Poor's. Newmont's credit was reduced to BBB from BBB+, largely as a result of weak third-quarter revenues that missed analysts' expectations. Weakness in the company's gold business was cited as the reason for the revenue miss.
The bottom line here is that NEM is likely to continue its downward spiral, and that means more pain added to the stock's year-to-date drop of more than 40%.
Action to Take --> If you own any of these three stocks, it's time to move on. You might consider re-entering these stocks once they sink to more-attractive valuations.