“Sell in May and go away” is a common adage in investing. It’s based on the historical pattern of stocks underperforming from May to October when investors tend to stay on the sidelines. While timing the market is sketchy work at best, following the herd might be the best option for some investors.
All that’s left is figuring out if you’re holding prime stocks to sell. So, I’ve developed a list of companies that might get the short stick in May based on these criteria.
- Trade above their mean target price
- Have a hold to strong sell rating from analysts
Then, I sorted them based on the highest percentage difference from the stock’s mean target price. This lets me focus on stocks that are too far from their fair price, according to analyst estimates.
GameStop Corp (GME)
If you grew up as a gamer, you’d have heard of GameStop Corp (NYSE:GME). The company sells video games and related products via its e-commerce platform and local stores.
Gamestop operates in more than 4000 stores across the United States, Canada, Australia and Europe. In addition to video games, the company offers print and digital gaming publications, gadgets, electronics, collectibles and toys.
GME experienced a massive price surge in 2021, primarily thanks to investors from r/wallstreetbets on Reddit. This herd mentality forced other institutional buyers to cover their positions, leading to a short squeeze and significant losses.
As a result, investors now see GameStop as a meme stock. Once Keith Hill, more commonly known as Roaring Kitty, posted about GME in May 2024 after nearly four years, the stock peaked at over $60 and now trades at $18.83.
However, analysts estimate that GME has only a $7 target price. This means GME stock still trades way above its target price. Analysts covering GameStop warn that it is one of the most clear-cut stocks to sell right now, as the company presents a significant short-term sell-off risk.
Synlogic (SYBX)
Biopharmaceutical company Synlogic (NASDAQ:SYBX) aims to transform the care for various diseases. Synlogic boasts pipeline products aimed at treating diseases like gout, hyperoxaluria and cystinuria. It leads by its proprietary approach of creating oral medicines with new enzymatic pathways built to produce or consume its specific biological targets.
Synlogic’s fiscal year 2023 financials saw revenue and EPS improvements. Notably, the top line grew from $1.18 million to $3.37 million, an almost 200% increase. However, some glaring issues dampen this otherwise good news.
Expenses remain elevated, and the company continues to operate at a significant net loss. In addition, the company discontinued its Synpheny-3 study. The decision came after an independent data monitoring committee stated that “the trial was unlikely to meet its primary endpoint.” Symphony-3 was the company’s lead program, and its closure will certainly affect its prospects.
Analysts have issued a hold recommendation for SYBX stock. Meanwhile, the stock trades at $1.58, past its $1 mean target price. This makes SYBX stock a near-obvious choice to sell.
NL Industries (NL)
NL Industries (NYSE:NL) is a holding company that owns CompX. CompX manufactures electronic and mechanical locking mechanisms in offices, storage and healthcare. The company also manufactures exhaust systems, wake enhancement systems and other hardware and accessories used in various industries. Additionally, NL Industries holds a non-controlling stake in the TiO2 (titanium dioxide) pigments producer Kronos.
Unfortunately, NL Industries reported a net loss of $2.3 million for fiscal year 2023, a significant drop from last year’s $33.8 million profit. Also, Kronos saw decreased net sales and income due to lower sales volumes and TiO2 selling prices. Additionally, NL incurred non-cash losses due to its terminated U.K. pension plan, further contributing to its overall loss.
No wonder Barclays rates it as a sell. And, the firm placed NL stock’s mean target price at $5. Currently, it’s trading at 45.6% higher at $7.45.
So, for holders of NL stock, perhaps it’s time to pack up and look for opportunities elsewhere.
On the date of publication, Rick Orford did not have (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.