Better sell 10 stocks before it gets worse, analysts say:


Wall Street analysts tend to be a pretty optimistic bunch. So if they adamantly tell you to sell some S&P 500 stock, that’s saying something.


More analysts gave more sell ratings on 10 stocks than any other in the S&P 500, including: Pinnacle West Capital (PNW), Consolidated Edison (ED) and Franklin Resources (BEN), says data from FactSet. It’s just the latest sign of heightened caution on Wall Street after more than nine months of selling.

Analysts have been more pessimistic in their revisions to third-quarter earnings estimates for S&P 500 companies.
compared to past quarters, while companies were slightly less pessimistic in their earnings outlook for the third
quarter compared to past quarters,” said John Butters, an earnings analyst at FactSet.

S&P 500 analyst (slow) be careful

Analyst concerns are just beginning to creep in. Analysts are only recommending 5.7% of the stock to sell, FactSet’s John Butters said. That’s actually less than the 6% of reviews sold on average over the past five years. But if you look closer, you can see a little obscuration of optimism. Less than 56% of stock ratings are now a buy, which is slightly below the February peak of 57.4%.

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Why the concern? It doesn’t help to see the S&P 500 fall nearly 20% this year. Nor is the growing concern about the shape of corporate profits. Analysts expect the S&P 500 profit to rise just 3.5% in the third quarter, Butters said. If that’s the latest figure, that would be the lowest quarterly growth rate since Q3 2020.

Now you can see why some analysts want to avoid some S&P 500 stocks.

More than half of analysts say they are selling Pinnacle West and consolidated Edison

Sales reviews are rare. Even rarer are companies where more than half of the reviews are a sale.

But that’s the case with two S&P 500 utilities: Pinnacle West and Consolidated Edison. Saying goodbye to these companies is a difficult decision. They are one of the few stocks that have actually moved up this year. Pinnacle West, which supplies power primarily in Arizona, is up more than 4% this year, on top of a 4.6% yield. And East Coast energy company Consolidated Edison is up even more, up 14.4% this year, which is icing on the cake of a 3.2% dividend yield, says S&P Global Market Intelligence.

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And yet analysts are getting as close as they can to knocking the table for investors to get out. Sixty-three percent of analyst ratings for both stocks are a sell. Sure, appreciation has something to do with it. Consolidated is now trading for nearly 22 times its profit in the past 12 months. That’s pretty rich for a company that should only grow at 3% per year in the long run.

Downward spiral? Sell ​​the asset managers

When analysts get bearish on utilities, it’s largely a valuation question. But being negative about giant companies that invest in stocks on behalf of investors is more of a tell-tale in the markets.

Over 40% of ratings on asset manager Franklin Resources and 38% on T. Rowe Price (TROW) are sales. This is an important call because the profits of both companies fall when the market falls. Both take a share of investors’ portfolios, and when the portfolios lose value, so does the wealth managers’ income.

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As a result, the shares of both asset managers suffered this year. Franklin is down 28% and T. Rowe Price’s stock is down more than 40%. And there are lasting fundamental reasons driving the trap. T. Rowe’s adjusted earnings are expected to fall more than 30% this year. And its projected 2026 earnings of $10.68 per share are more than 16% lower than what the company earned in 2021.

Analysts are not always right. But they are rarely this bearish, and you have been warned.

S&P 500 stocks with the highest percentage of sales ratings

Company Symbol % of ‘sell’ reviews Stock YTD % ch. Sector
Pinnacle West Capital (PNW) 63% 4.2% Utilities
Consolidated Edison (ED) 63 14.4 Utilities
Clorox (CLX) 50 -18.6 consumer goods
Lumen technologies (LUMN) 46 -30.0 Communication services
Robert Half International (RHI) 43 -31.4 Industrial
Franklin Resources (BEN) 42 -28.2 Financial
T. Rowe Price (TROW) 38 -44.5 Financial
Church & Dwight (CHD) 36 -25.2 consumer goods
clickable (SNA) 36 -1.3 Industrial
JM Smucker (SJM) 29 2.6 consumer goods

Sources: IBD, FactSet, S&P Global Market Intelligence