It’s Time to Clean the Weaker Stocks Out of Your Portfolio

There’s less than a month until the presidential election. I’m not going to say much more than we are sure to be in for a wild ride of market volatility.

Not that we’ve really seen volatility taper off at all this year.

Just take a look at the VIX (volatility index).

The VIX is a real-time market index that represents the market’s expectation of 30-day forward looking volatility. And in March, we saw levels that we hadn’t seen since 2008.

Despite the election coming up, the VIX has dropped into what is the acceptable range (usually 18-35). But it’s still staying towards the high end of the range.

We haven’t seen it settle past 20 since before the initial take off at the end of February.

I’ve said it before and I’ll say it again: This is a time when the Weiss Ratings are one of the best tools that you could have. Every stock has a “Buy”, “Hold” or “Sell” rating.

Now, I’ve been talking a lot about top three stocks in my Thursday issues, and of course I’d love to hear if you’ve taken action on any of those. But today, I want to look at some of our lower rated stocks.

After all, you can be leveraged in as many winning positions as you want. But if you’re also still invested in losers that are bringing down your portfolio, can you still claim the win?

Since tech has been a hot sector this year, I decided to look for stocks in the software and services industry that had a “D+” or lower. The result was 403 stocks.

Yes, some of those are small stocks that no one has ever heard of. So, I took a quick skim and pulled out some names that you might have heard of ... and that you might just have sitting in your portfolio.

First up is Slack Technologies, Inc. (NYSE: WORK, Rated “D”). Slack has always touted itself as a new way to communicate with your team. It’s essentially a message board. I will admit, I’ve used it for projects, and it can replace long email chains that can easily get lost in the shuffle. However, there’s still the question of whether it can compete with Microsoft Teams, Google Meet and even Zoom.

And that’s a question weighing on its price. Since the beginning of the year, shares are only up 33% ... making Slack a true market underperformer. This one is definitely screaming sell.

Next up is Wix.com Ltd. (Nasdaq: WIX, Rated “D”). If you haven’t used Wix, you’ve probably heard of it. The company markets a cloud-based platform that makes it easy for anyone to create a website. Developers can choose from different levels of membership and tons of add-ons and plugins.

There is some speculation that more people are now self-employed or turning their hobbies into money-making operations and thus in need of services like Wix. But this is just speculation.

Shares are up 127% since the beginning of the year. Recently though, they seem to have settled and are trading fairly flat. Sounds like another instance where you might want to take the money and run before volatility takes all your profits.

Finally, we’ve got Dropbox, Inc. (Nasdaq: DBX, Rated “D. Dropbox is a collaboration platform that allows individuals and organizations to share documents and ideas. Sounds like a tool that would be useful during the work from home revolution.

That said, share prices have been super choppy the entire year. And even now, shares are only up 9.9% since the beginning of the year. This is a clear underperformer and will certainly drag your portfolio down.

Some runners up are ...

DocuSign, Inc. (Nasdaq: DOCU, Rated “D+”). We’ve rated this one in the “D” range since it started trading. The share price has doubled this year as investors have run up technology stocks. But the actual fundamentals of the stock do not support that kind of share price growth. There’s no time than the present to collect your gains to make sure you’re not there for the slide.

Shopify Inc. (NYSE: SHOP, Rated “D+”). Over the years, Shopify has made it into the “C” range ... but has never made it to the “Buy” range. This is another stock that has seen a rise in share prices without having the fundamentals to back it up.

Since the beginning of the year, investors have seen 169% gains. And if you’re one of them — excellent! You might just want to cash those in just in case the market gets more volatile.

Please remember these are just a few companies that I pulled for today. Right now, 6,685 stocks have a “Sell” rating. Go on over to weissratings.com to make sure that your gains aren’t at risk during this increased volatility.

Best,

Kelly Green