The stock market ended 2018 on a sour note. Back in September, stocks were flying at record highs. Since then, they’ve dropped 20% amid a flurry of concerns ranging from higher rates to bigger tariffs to slowing growth. Yet, most Wall Street analysts view the selloff as overdone, and the consensus 2019 S&P 500 price target still sits around 3,000, representing a whopping 25% upside for stocks next year.

In other words, Wall Street is saying that the recent correction is simply near-term pain that will be replaced by long-term gain in 2019.

This consensus thesis seems rationale. The headwinds that are plaguing markets (falling oil prices, trade war tensions and rising rates) are all fixable, and will likely be fixed in 2019. OPEC is cutting production. China and the U.S. are starting to make cessations, and will likely continue to do so to stop from “over-hurting” their respective economies. And, the Fed will likely go more dovish in 2019, as the economy slows.

If those headwinds disappear in 2019, and growth remains stable, stocks should rally here, with the S&P 500 trading at its lowest trailing twelve month P/E multiple since 2012 and highest dividend yield since early 2016.

But, that doesn’t mean the rally will start in January, nor does it mean that this rising tide will lift all boats. Instead, there are a handful of stocks investors should continue to avoid, even in the new year.

With that in mind, let’s take a look at seven stocks to sell in January.

Tilray (TLRY)

If you had to pick one stock to characterize the 2018 cannabis craze, it would have to be Tilray(NASDAQ:TLRY). The Canadian pot company saw its stock go from $20 to $300 to $90 to $150 to $70, all in the matter of just five months.

The problem with Tilray heading into 2019 is that this stock’s biggest potential catalyst (a big investment from a big beverage or tobacco company) is now in the rear-view mirror. Global beverage giant and the world’s largest beer maker, AB InBev (NYSE:BUD), put in $50 million to help facilitate cannabis beverage research with Tilray. The deal was underwhelming. The initial pop in TLRY stock was faded. Now, it seems all the dry powder has been used up.

Meanwhile, the valuation is still extended and the Canadian cannabis market is still suffering from supply shortages. Overall, the near-term fundamentals here aren’t great, meaning TLRY stock should remain weak in early 2019.

Micron (MU)

Chipmaker Micron (NASDAQ:MU) is the type of stock you buy when the music is playing, and sell when the music isn’t playing. For the past several months, the music hasn’t been playing for Micron. It doesn’t look like it’s going to start playing anytime soon, either.

Demand across the memory space is stagnating due to global economic concerns. Meanwhile, supply is building. Thus, the current memory market dynamic is one defined by rising supply and falling demand, and that ultimately results in lower chip prices and lower margins for Micron. When margins fall, MU stock falls, too.

The problem here is that we are early in this down-cycle, and no one knows how long it will last. Thus, until the market gets confirmation that margins are turning a corner, MU stock will remain depressed, regardless of valuation, because no one knows exactly how far earnings will fall (prior down cycles have wiped out earnings entirely).

Yelp (YELP)

Over the past several years, Yelp (NASDAQ:YELP) has under performed its digital ad peers in a big way because the company’s digital ad business simply hasn’t gained the traction that the ad businesses at Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB) Alphabet(NASDAQ:GOOG, NASDAQ:GOOGL) or Twitter (NYSE:TWTR) have.

Yet, despite this relatively weak ad business performance, Yelp stock has found a floor recently around $30 due to rumored M&A prospects. I don’t buy these prospects. Who would want to buy Yelp? The potential suitors include Amazon, Facebook and Alphabet. But, each of them are expanding an in-house recommendations and rating system, and those in-house systems are arguably already better than Yelp. Thus, there really isn’t a compelling M&A motive here.

Consequently, the M&A catalyst should fall out in 2019. Once it does, Yelp stock will drop.

Snap (SNAP)

If anything became crystal clear in 2018 in the digital ad space, it is that once trending Snap(NYSE:SNAP) is now an afterthought for users and advertisers.

The story here is simple. Snap pioneered a new way method of ephemeral photo sharing. Everyone loved it, and everyone joined Snapchat. But, Snap didn’t protect this method, and so everyone else copied it. Everyone else had more resources, too, so they actually made better versions of Snapchat. Those better versions stole all the users. Now, Snap is left with a maxed out user base that isn’t big enough to attract advertisers in bulk.

If advertisers don’t flock to Snap in bulk, ad prices will remain cheap and margins will remain depressed. Advertisers won’t flock to Snap until user growth picks back up. Thus, until user growth turns around, this is certainly one of the key stocks to sell in January and one that investors should avoid.

JCPenney (JCP)

By now, it is well known that retailers had a really strong 2018 holiday showing. According to Mastercard, holiday retail sales rose 5% to their best level in six years, driven largely by a near 20% increase in digital shopping. But, not all retailers were big winners this holiday season. One retailer that appears to have struggled in a big way is JCPenney (NYSE:JCP).

JCP has struggled to compete in the hyper-competitive retail industry for several years. As other companies have built out omni-channel capabilities and improved product assortment, JCP has been too burdened by a debt-heavy balance sheet and falling margins to invest much of anything back into the business. As such, JCP has turned into the eyesore of retail.

This holiday season was more of the same. According to retail analytics firm Placer.ai, Black Friday weekend shopping traffic rose 10% this year. But, JCP under performed, with foot traffic rising just 1%. That’s a bearish read, and it underscores that even in a healthy economy, JCP continues to struggle. If JCP’s holiday numbers disappoint (as I expect them to), you could see JCP stock fall in a big way in early 2019.

Starbucks (SBUX)

The problem with retail coffee giant Starbucks (NASDAQ:SBUX) is three fold. First, the entire growth narrative at Starbucks is centered around expansion in China. But, the Chinese economy is cooling, and is expected to keep cooling in 2019. The more it cools, the more Starbucks’ 2019 growth rates will be impacted, and the more of a drag that will have on SBUX stock.

Second, Starbucks is a premium-priced coffee house that is anything but recession resilient. Coffee is easy to get anywhere. But, coffee at Starbucks is more expensive than coffee at McDonald’s (NYSE:MCD). Thus, if the economy does slow in 2019 and the consumer starts to feel the impact, that means that morning Starbucks runs will be replaced by morning McDonald’s runs.

Third, SBUX stock trades at around 24 forward earnings. That’s a big multiple. It hardly takes into account the aforementioned risks. Thus, if those risks rear their ugly head in 2019, SBUX stock could drop in a big way.

Proctor & Gamble (PG)

During the market selloff, defense has become the new offense, and investors have rushed into defensive consumer staples names like Proctor & Gamble (NYSE:PG). But, this rush has inflated defensive stock valuations to levels that aren’t sustainable. In 2019, as clarity and stability emerge out of the ashes of the late 2018 selloff, defensive stocks like PG will likely suffer, which lands it on this list of stocks to sell.

At the current moment, PG stock trades at an above-average valuation with a below-average yield. The big valuation is the result of broad economic uncertainty. That uncertainty won’t last forever. Either we enter a recession in 2019, or we don’t. If we do, PG stock will drop because, while it’s recession resilient, it isn’t recession proof (during the 2008 recession, PG stock still fell about 40%). If we don’t, PG stock will fall because investors will stop playing defense, and will roll money back into growth names.

Overall, the current uncertainty that’s inflating PG stock won’t last forever. Indeed, it will likely come to an end in 2019. When it does, PG stock is liable to drop.

As of this writing, Luke Lango was long AMZN, FB, GOOG and TWTR. 

This ‘Overlooked’ Sector Produced the Biggest Winners of the Last Decade
Wall Street is oblivious to it, yet you can earn 2,537% profits from an overlooked "blue chip" sector. The same group of stocks that has produced some of the biggest winners of the last 10 years.
Investors have earned 618%, 834%, and up to 2,500% - performing better than Amazon, Netflix and Facebook.
Click here to get in on your own 2,537% windfall.

Source: Investor Place

As Warren Buffett likes to say, “price you what you pay, value is what you get.” It’s the reason why a $300-per-share stock can be cheap, while a $3 one can be expensive. With that said, there’s something about low-priced stocks that captivates investors’ imaginations. After all, there’s nothing like being able to buy a ton of shares for dirt cheap and having them take off. And there is some method to this madness.

For example, the Fidelity Low-Priced Stock Fund (MUTF:FLPSX) has managed to return nearly 15% annually over the last 10 years. That return has managed to beat both the small-cap-focused Russell 2000 and Russell Midcap Index over that time. Low-priced stocks can be a big source of additional alpha and returns.

The key is that many low-priced stocks are cheap for a reason. Finding the ones that have the potential for greatness or overcoming their issues is vital. They are a gamble, but the payoff can be big for portfolios. The idea is to keep your bets small and broad.

For investors looking to put some risk capital to work, here are five low-priced stocks that have great potential in the new year.

Dova Pharmaceuticals Inc (DOVA)

Closing Share Price on Dec. 19: $6.07

Over the summer, Dova Pharmaceuticals (NASDAQ:DOVA) was riding high. The biotech firm had scored an approval for their drug Doptelet. The drug is used to treat thrombocytopenia — which is a low-blood-platelet disorder. With that disease, patients find it hard to form blood clots and suffer major bleeding from even a small injury. The drug has plenty of blockbuster potential. Unfortunately, that potential hasn’t lived up to expectations.

Management recently cut sales guidance for the drug down to just $2.4 million. That’s about half of what Wall Street is looking for. At the same time, several key executives have recently left the company. Naturally, investors are spooked and shares have nose-dived, dropping from a recent high of about $30 per share down to under $7.

But that could be a great buying opportunity for this low-priced stock.

For one thing, the potential for Doptelet is there. DOVA is looking to fast-track Doptelet for other indications of thrombocytopenia. That will expand the usage of the drug and bring in more revenues. Secondly, Dova has replaced many of its outgoing managers with executives from winning biotechs like United Therapeutics (NASDAQ:UTHR) and Vertex (NASDAQ:VRTX).

With that, analysts still have price targets in the $20 to $30 range on this low-priced stock.

Trivago (TRVG)

Closing Share Price on Dec. 19: $5.81

Internet travel websites are known for their profitability, as their margins remain crazy high. However, for hotel booking site Trivago (NASDAQ:TRVG) that hasn’t been the case over the last year or so. TRVG has spent much of the last few quarters disappointing investors and has lost money. That’s sent shares tumbling and below $6 per share.

However, TRVG may be a bargain among low-priced stocks.

For one thing, the bleeding seems to have stopped. While revenues continue to drop, profits have come back to the travel site. Trivago managed to post net income of 10.1 million euros or around 0.03 euros per share last quarter. Analysts were looking for another loss.

And other things have gotten better for TRVG as well. Returns on advertising spend jumped by 25 percentage points to reach 135.9%, while the firm continues to see improvement/demand from its mobile site. Additionally, Trivago continues to see huge listing numbers — over a million places — from so-called alternative accommodations, including private apartments and vacation rental properties. This is great considering this is the fastest-growing section of travel booking. All in all, analysts expect the firm to continue to see profits in 2019.

When it comes to low-priced stocks, Trivago’s turnaround is one to bet on.

Goldcorp (GG)

Closing Share Price on Dec. 19: $9.23

With volatility and uncertainty rising, gold has been riding high over the last few quarters. That surge in gold prices hasn’t exactly reached former gold stock kingpin Goldcorp (NYSE:GG), though. In fact, the GG share price currently places it among the low-priced stocks and castaways of the mining sector. The gold miner’s stock has now fallen to levels not seen since 2002!

And part of that decline is justified.

Goldcorp continues to be hit on several fronts. During the spring, the miner reported lower production and rising all-in costs. This trend continued during the fall. Last quarter, Goldcorp once again showed a decline in production — by roughly 20% — and saw its all-in sustaining costs surge higher. That’s terrible. Essentially, GG hasn’t been able to capitalize on the higher gold prices and is now earning less on what it does mine.

But there may be some hope for this low-priced stock.

Goldcorp mentioned that drop in production was a short-term dip due to lower one-time output at the company’s Penasquito mine. Meanwhile, the firm has made significant progress on its 20/20/20 plan, which will see production rising by 20%, costs falling by 20% and asset reserves growing by 20%. Ramped-up production at its Eleonore and Cerro Negro mines have helped here. Moreover, GG is producing decent cash flow and has resumed its dividend payment.

If management can execute on its plan, GG stock should regain much of its former glory. That makes it one of the best low-priced stocks to snag in the mining sector.

Barclays PLC ADR (BCS)

Closing Share Price on Dec. 19: $7.46

One of the biggest shadows on the entire market happens to be the dreaded Brexit. Naturally, the U.K.’s exit from the European Union hasn’t gone smoothly. Heck, at this point, an exit might not happen even at all. Because of that, it has thrown plenty of uncertainty over stocks in the United Kingdom. This includes U.K. banking giant Barclays PLC ADR (NYSE:BCS).

BCS never fully recovered from the financial crisis, and the latest Brexit woes have put a hurt on its share price, which currently rests below $8 per share. But that low price does offer some bang for the buck.

For one thing, Barclays is dirt cheap and can be had for a forward P/E of around its share price. At the same time, it has a price-to-growth ratio of less than 1. That means would be investors are not paying much for its current earnings nor its future projections. Those future projections are coming from its continued moves to court more international high-net-worth investors from the Middle East. Additionally, recent moves into Fintech have improved BCS margins.

All of this is starting to pay-off. Last quarter, BCS saw some big jumps to its profits and revenues- despite the Brexit mess. The firm reported EPS of £0.07 and total net income of £5.13 billion. This was roughly double what analysts expected it to earn per share. The hope is that Barclay’s can keep it going with the world’s economy getting a bit rocky.

But with its rock-bottom P/E and PEG, the bank is a prime example of value among low-priced stocks today.

Vereit (VER)

Closing Share Price on Dec. 19: $7.49

Sometimes low-priced stocks are being punished for things that happened years earlier. Case in point, real estate investment trust Vereit (NYSE: VER). VER’s issues started back in 2016 when it was called American Realty Capital Properties. American Realty was created by combining several non-traded REITs, and it quickly became one of the largest single-property REITs in the country. At its peak, it held more than 4,600 different properties. Unfortunately, executives at the firm weren’t so great and it turned out that they used all sorts of questionable accounting tricks.

Naturally, shares of VER sank like a stone when the news came out. Several lawsuits, jail time, a dividend cut and a name change bring us to Vereit. And that’s actually a good thing.

The new management at the firm has worked to reduce and prune its portfolio of underperforming and “flat” leased properties. Debt reduction and bolstering its balance sheet have also been a priority. These efforts have helped and VER finally started to turn the corner. Cash flows continue to be robust and the firm is able to pay its juicy 7%-plus yield.

The problem remains the overhang of lawsuits from shareholders. But with many shareholders already settling, VER is getting closer to being 100% free from its past. With the end in sight, the real estate firm could be one of the most sure things when it comes to low-priced stocks.

Disclosure: At the time of writing, Aaron Levitt did not have a position in any of the stocks listed, but may initiate a position in DOVA.

This ‘Overlooked’ Sector Produced the Biggest Winners of the Last Decade
Wall Street is oblivious to it, yet you can earn 2,537% profits from an overlooked "blue chip" sector. The same group of stocks that has produced some of the biggest winners of the last 10 years.
Investors have earned 618%, 834%, and up to 2,500% - performing better than Amazon, Netflix and Facebook.
Click here to get in on your own 2,537% windfall.

Source: Investor Place