It’s time to reconsider strategies and identify growth stocks to sell.
For many years, growth stocks were the key to building a top-performing portfolio. Investing in profitable growth stocks meant oversized returns and was a winning strategy.
But with the market sagging through all of 2022, all of that has changed.
Put simply, a growth stock is a company that is expected to grow significantly quicker than the average company in the stock market. For many quarters, you could put a lot of hot tech stocks into that category.
On the other end of the table, value stocks are stocks that trade at a lower price relative to its fundamentals. But this hasn’t been the year for growth stocks.
For example, the Vanguard S&P 500 Growth Index Fund (NYSEARCA:VOOG) is down nearly 29% so far this year. That by far underperforms the Dow Jones Industrial Average (down 11.8%) and the S&P 500 (down 20%).
By using my exclusive Portfolio Grader tool, you can identify the growth stocks to sell that are likely to be the biggest drains on a portfolio.
The Portfolio Grader evaluates stocks on their fundamentals and factors in buying pressure and quantitative factors. Stocks that get a low “F” grade should be avoided.
Here are seven growth stocks to sell now, based on their Portfolio Grader ratings:
| CVNA | Carvana | $14.49 |
| PENN | Penn Entertainment | $32.00 |
| PYPL | PayPal Holdings | $86.72 |
| ZM | Zoom Video | $84.21 |
| SFIX | Stitch Fix | $3.96 |
| DDI | DoubleDown Interactive | $9.49 |
| CGC | Canopy Growth Corp. | $3.01 |
Carvana (CVNA)
Carvana (NYSE:CVNA) looked to become a popular option for buying and selling cars while avoiding traditional automotive sales departments.
For a while, CVNA stock was flying high, now it’s one of the stocks to sell right now. In August 2021, share rose to more than $350 but it’s been all downhill since. A spike in used car prices makes buying a new car less appealing.
Today CVNA stock is less than $15 – a drop of almost 95% on the year – and the company is still posting losses on a quarterly basis. Analysts don’t think Carvana will turn a profit until 2025.
CVNA stock has an “F” rating in the Portfolio Grader.
Penn Entertainment (PENN)
Penn Entertainment (NASDAQ:PENN) is going all-in on sports betting. It bought 36% of Barstool Sports back in 2020, and now it’s exercising its right to buy 100% of the company.
A year ago, that looked like a great bet, but investor enthusiasm for online gaming has been waning in the last few months. The rollout for legalized gaming is slower than anticipated. Online wagering is legal in less than 20 U.S. states.
That makes companies like PENN among the growth stocks to sell in this volatile market. The stock is down by more than 40% so far this year, and Penn Entertainment has had difficulties hitting earnings projections.
Not surprisingly, the Portfolio Grader is dinging PENN stock pretty hard for these miscues. PENN has an “F” rating.
PayPal Holdings (PYPL)
I really can’t blame anyone for looking at the PayPal Holdings (NYSE:PYPL) chart and feeling a little hopeful.
Paypal at one point was a reliable growth stock as consumers looking for an alternative, easy digital payment system. PayPal became one of the most popular peer-to-peer payment systems. Today more than 70 million people use PayPal’s Venmo app.
But there’s lots of competition in the space. Block (NYSE:SQ) has Cash App, which had 44 million monthly active users in the fourth quarter of 2021. And Zelle, an app that’s backed by Bank of America (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo (NYSE:WFC) and others, moves more money per month than Cash App and Venmo combined.
PYPL stock is down 50% this year and yes, those losses have leveled out in the last five months. Analysts project improved EPS in the future – thanks in part to the company’s cost-cutting efforts and share repurchases.
But I think the market is already pricing in PayPal’s improved operating performance and it’s more likely the stock will fall than rise, making it one of the growth stocks to sell before it bottoms out.
PYPL stock has an “F” rating in the Portfolio Grader.
Zoom Video Communications (ZM)
Zoom Video Communications (NASDAQ:ZM) is the quintessential pandemic stock.
When people were stuck at home and remote work (and school) became a requirement and not just an option, Zoom stock soared as people looked to the platform to stay connected in virtual meetings and classes.
In October 2020, ZM stock was more than $560 per share. But now its just over $80 and there’s no reason to think that it will ever come close to its previous highs.
Platforms like Microsoft (NASDAQ:MSFT) has a Teams platform that is highly regarded and is seen as having superior security – in fact, federal government agencies to this day use Microsoft Teams for online meetings rather than Zoom.
So far this year, ZM stock is down nearly 55%. Third-quarter revenue of $1.1 billion was up only 7.6% on a year-over-year basis, missing analysts’ expectations for revenue of $1.12 billion.
It looks like ZM stock has peaked. It has an “F” rating in the Portfolio Grader.
Stitch Fix (SFIX)
Fashion and clothing company Stitch Fix (NASDAQ:SFIX) climbed on the e-commerce wagon and was another popular pandemic stock.
But runaway inflation means people have less money to spend on new outfits. And with Covid-19 restrictions lifted, people are returning to brick-and-mortar stores to do their shopping.
In the fiscal fourth quarter, SFIX missed on both top and bottom lines, with revenue of $481.9 million and an earnings loss of 89 cents per share worse than expectations of $488.79 million revenue and an expected earnings loss of 60 cents per share.
SFIX stock has an “F” rating in the Portfolio Grader.
DoubleDown Interactive (DDI)
Online gaming is really popular, whether you’re using a mobile device or playing on the web with your desktop or laptop computer. Companies like Electronic Arts (NASDAQ:EA) and Take-Two Interactive (NASDAQ:TTWO) have loyal followings and own major franchises.
DoubleDown Interactive (NASDAQ:DDI) is trying to be a part of that conversation as well, but it’s not nearly as popular as the others. DDI specializes in casino-style games, although its most popular title is Undead World: Hero Survival.
But it’s going to be hard for DDI to compete with its bigger competitors. With a market capitalization of only $478 million, it doesn’t have the resources of EA (market cap of $35.5 billion) or Take-Two (market cap of $20.5 billion).
DoubleDown could only manage $80.57 million in revenue in the second quarter, and its year-to-date loss of 37% is much worse than the competition. DDI stock has an “F” rating in the Portfolio Grader.
Canopy Growth Corporation (CGC)
It may be a stretch to call Canopy Growth Corporation (NASDAQ:CGC) a true growth stock because its growth was really a matter of speculation than anything else.
CGC stock grew to as much as $42 per share in early 2021 as Democrats took control of the White House and both houses of Congress, raising hopes that the U.S. would finally follow Canada’s lead and decriminalize recreational marijuana use on a federal level.
But it hasn’t happened. The Democrats have been too busy dealing with the economy, inflation, the Covid-19 pandemic, Russia’s war against Ukraine and non-economic issues like abortion rights to put any time into marijuana legislation.
CGC stock is down by 70% so far this year, and it has an “F” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.