Finding stocks to sell in 2024 isn’t hard, but actually executing is another matter. For example, bearish sentiment abounds around the Magnificent Seven as the S&P 500 hits all-time highs despite sweeping tech layoffs and overall economic unease. And sure, you could short a stock like Nvidia (NASDAQ:NVDA) on the grounds of massive overvaluation. But ask the thousands of traders who thought the same over the past year as the stock consistently climbed higher how that works out.
Instead, if you’re looking for stocks to sell in 2024, find those materially overvalued and facing stronger headwinds than others in the market or specific sector. These three strong cover sectors as diverse as financial services, auto manufacturing and apparel. The one thing they have in common? They’re at the top of the list of stocks to sell in 2024.
Affirm Holdings (AFRM)
Affirm Holdings (NASDAQ:AFRM) is on a hot streak, returning more than 180% over the past year. But hot streaks must end, and the inherent weakness in AFRM’s model makes it a top stock to sell in 2024.
You likely know that Affirm’s bread-and-butter is its buy now, pay later model. This financing option is effectively a short-term micro-loan extended to consumers at a point of sale. But, for better or worse, consumers flocking to BNPL solutions tend to be less than creditworthy. And, with credit card delinquency rates skyrocketing, it’s only a matter of time before Affirm’s BNPL loans go unpaid en masse.
In its most recent filing, a look at Affirm’s balance sheet shows that its allowance for credit losses (expected delinquency write-offs) jumped more than 10% year-over-year. And that’s before the holiday sales season, where countless consumers doubtlessly extended their credit card limits and leaned on Affirm’s BNPL offerings. Overall, consumer and macroeconomic trends don’t point to good things ahead for Affirm in the short term, making it one of the top stocks to sell today.
I hate to say it, but after this week’s earnings, Tesla (NASDAQ:TSLA) is near the top of the list of stocks to sell in 2024. Musk is correct that Tesla is more than a car company. Its emergent AI and robotics sectors could prove winners in the long run. But that’s the future, and today’s focus needs to emphasize the viability of electric vehicles in a changing economic landscape.
Rapid price cutting led to slimmer margins throughout 2023, which, combined with falling EV demand, spells trouble for Tesla in 2024. This is nothing new, of course. This week’s earnings report made it abundantly clear that, in the words of Morningstar analyst Seth Goldstein, “Tesla is signaling that the days of 50% or even 30% to 40% growth year-over-year is not going to happen in 2024.”
Tesla already fell quite a bit this week, down 26% since January 1st at last count. If you’re sitting on sizeable gains from Tesla and don’t mind the tax hit, there are better ways to deploy your capital in 2024. If you think this is a buying opportunity, beware of trying to catch a falling knife. For now, the best bet is to keep your Tesla exposure limited to its weight in a standard index ETF like the SPDR S&P 500 ETF (NYSEARCA:SPY) and consider it a stock to sell otherwise.
Nike (NYSE:NKE) stock hasn’t kept pace with wider markets, losing more than 20% over the past year. Despite the underperformance, shares still trade well over fair value at nearly 30x earnings and 11x book value. And that’s on the heels of an abysmal December earnings report that included a weak 1% growth target and plans to cut more than $2 billion in overall costs.
Many of those cuts will likely come from payroll, which presents its own problems. Indicators point to Nike paying as much as $450 million in severance over the next few years as part of sweeping layoffs to save money long-term. But, as we’re seeing more and more, mass layoffs tend to be a harbinger of worse things to come.
Consumers aren’t as enamored with Nike products as they once were, as affordable alternatives abound and tightened household budgets prevent overspending on luxury sports apparel that comprise Nike’s core offering. A possible next step—value pricing—might prove the final nail in Nike’s coffin as it gives up brand clout for a quick payday.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.