Growth stocks are amazing choices for investors who are willing to take a little bit of added risk in the hopes that an innovative company will achieve above-average growth in revenue and earnings. But equally important is to identify growth stocks to sell should the ones in your portfolio aren’t pulling their weight.
Growth stocks are popular because they are expanding fast — at least, the good ones are — and plugging their profits into growing their businesses even more. That’s why many growth stocks don’t offer dividends or buy back stock, because they are too busy scaling their businesses or expanding via mergers and acquisitions.
Growth stocks are also often out of whack with their fundamentals — and that’s something to consider. It’s not entirely unusual to see a growth stock with a high price-to-sales ratio or a price-to-earnings ratio.
The other side of the coin to growth stocks are value stocks, which typically are solid, consistent performers that trade at a lower price relative to their fundamentals, and often reward shareholders with dividends or stock buybacks.
If you’re holding a growth stock that isn’t growing as much as it should, then you’ve probably got a growth stock to sell on your hands.
The Portfolio Grader can be an ideal tool to help you identify the underperformers as it evaluates stocks based on growth, earnings performance, momentum and other factors.
Today we’ll look at some growth stocks to sell. Some of them have strong grades in the Portfolio Grader for growth — but all of them are underperformers with an overall disappointing grade. Those are the ones that you want be the most cautious with when considering what kind of growth stocks you want to have in your holdings.
AMC Entertainment Holdings (AMC)
It’s hard for me to really consider AMC Entertainment Holdings (NYSE:AMC) a growth stock, but if it is, it’s certainly among the growth stocks to sell. It’s more of a meme stock to me because it was one of those that gained in popularity when retail investors decided to jump into it, GameStop (NYSE:GME) and a few others.
On top of that, this is a growth stock that’s not growing. While revenue in the fourth quarter was $1.1 billion, up from $990 million, AMC could not hold on to that momentum.
Preliminary Q1 figures show that AMC plans to post revenue of $951.4 million, a drop from $954.4 million in the first quarter of 2023.
AMC is also expected to post a loss of $163.5 million and 62 cents per share, versus a loss of $235.5 million and $1.71 per share a year ago.
AMC has a debt problem of $4.6 billion that continues to weigh on the company. Some lenders are seeking an extension on that debt payment, but that’s not enough to make me change my mind about AMC stock.
AMC stock is down 51% in 2024. It gets a “B” rating for growth but an “F” rating overall in the Portfolio Grader.
Magna International (MGA)
Magna International (NYSE:MGA) can do it all with automobiles. The Canadian company can do bodywork, power train modules, electrical systems and interiors. It can even manufacture complete vehicles.
The company has a partnership with General Motors (NYSE:GM) and Wipro (NYSE:WIT) to develop a business-to-business platform called SDVerse that would serve as a matchmaking platform for buyers and sellers of embedded automotive software.
But then there’s the downside. Magna also has a relationship with Fisker (OTCMKTS:FSRN), a struggling electric vehicle company that is just trying to stay out of bankruptcy at this point.
Evercore ISI downgraded MGA stock specifically because of the threat that Fisker poses to Magna’s bottom line.
Earnings for the fourth quarter were $10.4 billion, up from $9.5 billion a year ago. An EPS of 94 cents was better than the 33 cents per share that Magna earned in the fourth quarter of 2022.
While the earnings performance is OK, Fisker’s threat appears to be priced in to the stock price these days. MGA stock is down 18% this year and it gets a “B” rating for growth and a “D” overall rating in the Portfolio Grader.
BlackBerry (BB)
BlackBerry (NASDAQ:BB) made its mark as a maker of smartphones — it was one of the first devices in which you could get your email, and it was known for having a full keyboard on the device itself — which made for very small buttons.
But as other smartphone companies came along with better products that offered customer-pleasing apps and touch screen input, BlackBerry moved away from smartphones and to a software and services company.
It currently provides mobile device management, cybersecurity and software for autonomous vehicles.
Revenue in the fourth quarter was $173 million, down from $175 million a year ago. The company posted loss of $56 million and 10 cents per share for the quarter, which was an improvement from its loss of $495 million and 85 cents per share from the same quarter a year ago.
BB stock is down 19% this year, which is why I see it as one of the growth stocks to sell. It gets a “B” rating for growth but a “D” overall rating in the Portfolio Grader.
Boeing (BA)
What is there to say about Boeing (NYSE:BA)? There’s not much positive to say for this blue-chip company that is having a horrendous year.
The maker of the Boeing 737 Max 9 passenger jet is under tremendous pressure ever since the rear door flue off a jet while in midflight.
Federal investigators grounded the entire fleet for inspection and two airlines reported finding loose screws on their aircraft.
The Federal Aviation Administration and the National Transportation Safety Board have both been critical of Boeing, and with good reason.
Several online tools have popped up in response, showing passengers how to avoid getting on 737 Max when booking their flights.
None of this is publicity that will help Boeing or BA stock. Boeing is one of the worst performers this year in the Dow Jones Industrial Average.
The stock is down 32% this year and earns a “B” rating for growth and a “D” overall rating in the Portfolio Grader.
Block (SQ)
Block (NYSE:SQ) is a technology computer software company. Besides owning the hardware that allows people to process credit card transactions from a smartphone or tablet.
Block also operates the CashApp finance platform, which is used as an alternative to traditional banks.
In addition, Block has a significant investment in Bitcoin (BTC-USD), owning over 8,000 of the digital currency.
As the price of Bitcoin jumped 69% in 2024, Block realized $207 million in earnings from its Bitcoin holdings in the fourth quarter of 2023. That’s a huge percentage of the company’s overall $562 million in quarterly revenue.
So yes, Block is making money. But I’m also concerned that it’s overly reliant on the Bitcoin price to do so. Bitcoin is down 10% in the last month and that doesn’t bode well for SQ earnings when it next reports.
Bitcoin’s rise was the only reason Block registered a profit for the 2023 fiscal year. It needs to find another way to profit should Bitcoin continue to slide in 2024.
SQ stock is down 11% in 2024. It gets an “A” rating for growth but a “D” overall rating in the Portfolio Grader.
MercadoLibre (MELI)
It wasn’t too long ago that MercadoLibre (NASDAQ:MELI) carried an “A” grade in the Portfolio Grader, but time has not treated the e-commerce company favorably. This is a prime example of why it’s important to review your portfolio regularly.
MercadoLibre operates an e-commerce and digital marketplace. Not only does it handle over 21% of all e-commerce sales in Latin America, but it serves as a payment processor for people who don’t want to use a traditional bank.
However, MELI looks like it’s turning things around. First-quarter earnings reported May 2 showed net revenues up 36% from a year ago, and net income up 90%.
MELI stock is down 6% in 2024, though that may be changing as the stock is up 3.6% in after-hours trading after reporting earnings on Thursday afternoon. It gets an “A” rating for growth but a “D” overall grade in the Portfolio Grader.
Lamb Weston (LV)
Lamb Weston (NYSE:LW) is an Idaho-based food processor that specializes in potato products. Whether you’re dealing with sweet potatoes, french fries, tater tots, mashed potatoes or shredded potatoes — Lamb Weston has you covered.
The company has been expanding its reach outside of the U.S. by expanding its capacity at plants in Argentina and the Netherlands and building another facility in China.
As a growth stock, I see the wisdom in plowing money back into the business to reach more customers.
But is this working? In North America, the company reported that sales volume was down by 8% in the third quarter of fiscal 2024 because of the transition to a new enterprise resources planning system that reduced the visibility of inventory at distribution centers — leaving the company unable to fulfill orders.
That’s a painful problem because Lamb Western had the product but couldn’t sell it — and it potentially hurt its relationships with those disappointed customers.
LW stock is down 22% in 2024 and gets a “B” rating for growth and a “D” overall grade in the Portfolio Grader.
On the date of publication, Louis Navellier had a long position in LW. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article had a long position in BTC. The staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
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