10 Tech Stocks to Get Rid of Today

Source: Shutterstock

So it looks like the technology sector is back on a relatively firm footing. Facebook(NASDAQ:FB) and Netflix (NASDAQ:NFLX) have both taken dramatic tumbles in recent weeks dragging other tech stocks lower with them. But all of these names look stable now. Some are even knocking on the door of record highs again.

It’s a little too soon to give the “all-clear” sign for the entire tech sector though. Corrections are more of a process than an event, and while the next one may not be quite as dramatic, the recent meltdown may have already set the stage for another wave of selling. It’s just a matter of figuring out when it might happen, and what’s likely to trigger it.

But waiting until the next round of weakness starts to take shape may be too late.

With that as the backdrop, here’s a rundown of the market’s top 10 tech stocks to sell sooner than later. They may look healthy enough right now, but they each hold a little too much downside potential to blindly hang onto them.

Tech Stocks to Sell Today: Twilio (TWLO)

After Monday’s close, Twilio (NYSE:TWLO) reported second-quarter numbers that were far better than expected. Revenue of $147.8 million was higher than the $130.4 million the pros were calling for, and operating earnings of 3 cents per share topped estimates for a loss of 6 cents per share. As of this writing, shares were up roughly 19% for the session, moving into record-high territory thanks to the 100% gain TWLO shares dished out over the course of the past twelve months.

This may well be an “as good as it gets” situation, however. Though this may not be the exact top, the already overbought stock is still pushing its valuation limits… even more so now. Once profit-takers come out of the woodwork, a huge chunk of the impressive gain will likely be given back.

Tech Stocks to Sell Today: Advanced Micro Devices (AMD)

Should You Buy Advanced Micro Devices Stock Ahead of Earnings?

Source: Shutterstock

It’s not going to be a popular premise among many traders who’ve recently watched Advanced Micro Devices (NASDAQ:AMD) not just swing back to a profit, but post its best profit in seven years.

There are limits though, and AMD is likely to be near (of not at) its limit.

Working against AMD shares is the fact that the analyst community says it’s only worth $17.54 here, 10% lower than the stock’s current price. Though it’s possible for a stock to hold into a price above the consensus target, it’s pretty rare.

Tech Stocks to Sell Today: Docusign (DOCU)

Source: Shutterstock

Don’t sweat it if you haven’t heard of Docusign (NASDAQ:DOCU); most investors haven’t. There’s a good chance you’ve used Docusign without even realizing it, though. The company makes digital signature hardware, merging paper and e-documents to help usher in the paperless era.

It’s a viable industry, and Docusign is in a league of its own. Up 58% since its April intial-public-offering (IPO) price though, buying DOCU now is like playing with fire. Most IPOs start out good, but that optimism can fade rather quickly and lead into the usual post-IPO pullback that takes shape when the euphoria starts to wear off. Docusign is still waiting for the pullback.

Tech Stocks to Sell Today: Yext (YEXT)

Since early February, the price of Yext (NYSE:YEXT) has doubled thanks to a string of good news and a couple of very impressive earnings reports. There does come a time, however, when the gain has moved beyond what the underlying opportunity justifies.

Yext is, in simplest terms, a platform through which companies can manage their online identity. The big news of late has been partnerships with the likes of Yelp (NYSE:YELP) and Amazon.com  (NASDAQ:AMZN) that allow its clients to get more out of Yelp and Amazon’s Alexa-powered Echo.

While Yext is growing its top line like wildfire, it’s still expected to book significant losses at least through next year. And, even if it were profitable, the trailing price/sales ratio of 11.4 suggests it’s going to be overvalued at any plausible degree of profit margins.

Tech Stocks to Sell Today: Twitter (TWTR)

After Its Two-Day 27% Beatdown, TWTR Stock Is a Solid Risk/Reward Play

Source: Shutterstock

Twitter (NYSE:TWTR) shares have already fallen nearly 25% from their late July high, implying traders recognize the vulnerability ahead. But, with TWTR stock still up more than 100% since this time last year, more downside may be in the cards.

A couple of headwinds are finally catching up with Twitter. Chief among them is the obvious one — revenue growth is slowing. And it appears user growth is slowing as well. Capital spending is also expected to roll in higher than previously anticipated this year.

The other (and semi-related) headache? Like most other social networking platforms, Twitter is still struggling to find a fair balance between facilitating the expression of various ideas and keeping a lid on dangerous, inflammatory speech. It’s been far more difficult to manage than most anyone would have guessed.

Tech Stocks to Sell Today: Apple (AAPL)

Source: Shutterstuck

It’s difficult to bet against not just the world’s most recognizable corporate name, but the company that earned its way into being the world’s first $1 trillion company. But, with the 8% advance taking shape since late last month (thanks to a solid quarterly reportApple (NASDAQ:AAPL) is now up a hefty 32% for the past twelve months, and has gained almost 100% since this point in 2016. As was noted, the bullishness was earned by revenue and earnings growth.

There’s an uncomfortable reality taking shape, however. Like it or not, iPhone sales are slowing. Apple is cultivating other revenue paths, like its Services arm, to offset the impact of the iPhone headwind. It remains to be seen if the market really believes Apple can adequately make the shift from the flagship smartphone being its growth driver to another source of growth.

One may be better off on the sidelines while investors wrestle with the idea.

Tech Stocks to Sell Today: Tesla (TSLA)

tesla stock

Source: Shutterstock

Yes, electric carmaker Tesla (NASDAQ:TSLA) saw its stock roar 16% higher last Thursday in response to an impressive Q2 report. Though the company booked its biggest-ever loss, CEO Elon Musk also now says he’s looking for actual profits in the latter half of 2018 now that the operation has enough scale. In retrospect though, it seems more plausible that the Q2 report was just good enough to spark a serious short-covering rally.

And for the record, more than a handful of analysts doubt Musk will be meaningfully profitable over the course of the next few months. S&P Global Ratings analyst Nishit Madlani commented on the matter:

“Sustained positive free cash flow will depend heavily on improving manufacturing efficiency and maintaining discipline on capital spending.”

Most everyone knows about Musk’s penchant for overpromising and underdelivering. That applies to fiscal matters too.

Furthermore, Musk can’t keep Tesla out of the headlines. As of this writing, TSLA trade has been halted following some strange tweets from Musk which teased the company going private. So it’s probably best to stay away.

Tech Stocks to Sell Today: Square (SQ)

square stock

Source: Via Square

Kudos to Square (NYSE:SQ). The company has created a whole new category of peer-to-peer payment platform for use by small businesses, and most recently worked out a fruitful deal with online auction site eBay (NASDAQ:EBAY). Investors have been rewarded for Square’s forward progress as well. SQ stock is up 184% for the past year alone, driven by compelling headlines.

Calling a spade a spade though, Square has a valuation problem.

It’s profitable, and the bottom line is expected to improve from 45 cents per share this year to 78 cents per share next year. That still translates into a forward-looking P/E of 91.1 though, and at a trailing price/sales ratio of 10.9, it’s going to be nearly impossible for the company to earn its way into palatable valuation anytime soon.

Tech Stocks to Sell Today: Cree (CREE)

Source: Shutterstock

Cree (NASDAQ:CREE), for the unfamiliar, is best known for manufacturing LED lighting solutions. It’s more than just bulbs though. It’s also the underlying technologies that manage industrial scale lighting solutions.

There’s no question that LED lighting is the future, and there’s really no question that Cree has helped usher in the era of this new kind of hyper-efficient technology. To that end, the 113% advance CREE shares have dished out over the course of the past twelve months isn’t a begrudged gain.

Like so many other red hot stocks of late, however, Cree shares are bumping into a valuation headwind that will likely spook the market sooner or later. The stock is priced at 78x next year’s expected earnings, but next year should be a reasonably normal year for Cree, profit-wise.

Tech Stocks to Sell Today: GoPro (GPRO)

GoPro Inc GPRO Karma Drone and Hero 5

Source: GoPro

Last but not least, the 17% jump GoPro (NASDAQ:GPRO) shares made on Friday in response to its Q2 report was thrilling, but suspiciously short-lived.

The prod for Friday’s surge was chatter about a move to profitability come next year (though positive margins would start to emerge later this year). What CEO Nick Woodman didn’t really explain in meaningful detail, however, was exactly how things might turn around in the foreseeable future that haven’t been tried yet. Fanning the bullish flames on Friday may have been a fair amount of short-covering; more than 20% of the float was held as short positions.

If that post-earnings jump was going to last though, we would have seen better follow-through. The stock fell again on Monday and was tepid on Tuesday, having never achieved escape velocity. The bigger trend remains a lethargically bearish one.

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3 Unloved High-Yielders That Will Rise With Rates (and pay up to 7% in cash!)

Once again, almost everyone has gotten sucked in by a tired investor slogan that’s dead wrong—and it’s costing them big gains (and income).

But that’s good news for contrarians like us, because we can bank some easy profits thanks to this all-too-predictable reflex.

That’s especially true now that the Federal Reserve has sent out a blaringly obvious signal that it’s stuck to its rate-hike track, calling the economy “strong” after its latest meeting last week.

But let’s not get ahead of ourselves. Before I go further, the shopworn myth I’m talking about is that REITs nosedive when interest rates rise.

Many folks just can’t be talked out of it, despite all evidence to the contrary, including the fact that REITs skyrocketed during the last sustained rising-rate cycle, in 2004–06.

Taking the Short View

This “wisdom” is deceiving because it looks true: around the time the Fed raises rates or the yield on the benchmark 10-year Treasury takes off, REITs do take a hit.

To see this in action, check out the movements of the Vanguard Real Estate ETF (VNQ) and the yield on the 10-year Treasury in the first two months of 2018. There’s no doubt the higher Treasury yield weighed down REITs back then:

Rates Up, REITs Down?

But that’s a very short timeframe—just two months! And folks who dumped perfectly good REITs over the side back then have missed out on a huge rally since.

Because after plunging as low as 13% on the year in February, VNQ has surged, mainly on strong REIT earnings as the growing economy powers rent increases and demand for space.

The result? As of this writing, VNQ is underwater by a mere 1.5%!

REIT Worriers Miss Out—and Our Buy Window Narrows

That means just one thing: our time to buy REITs cheap is running out.

But if you’ve been on the sidelines this year, don’t worry. Even though REITs aren’t the screaming deal they were six months ago, there are still bargains waiting for us in this rebounding sector.

I’ll show you 3 great examples (with dividend yields up to 5.2%) in a moment. First, we need to talk about one popular REIT sector that’s gotten way ahead of itself.

Retail REITs: Great for Gamblers, Lousy for Investors

Mall landlords are so popular, they’re all most people think of when they hear about REITs—totally forgetting all the other (and often higher-yielding) corners of the sector: everything from cell tower REITs to apartment landlords, self-storage operators and warehouse owners.

The truth is, retail REITs are fine to trade in and out of … in the short term.

For example, if you’d bought one of the biggest retail REITs out there—Simon Property Group (SPG)—when REITs hit their 2018 low on February 8, you’d have racked up a huge 18% gain in just 6 months:

Retail REITs: Short-Term Upside …

But stretch that out over a longer time—say over the last three years—and performance has been dismal: barely a 6% return! You’d have been way better off dropping your cash into the SPDR S&P 500 ETF (SPY).

… But Longer-Term Mediocrity

I know what you’re thinking: “Brett, retail REITs like Simon have outperformed in the past—and for long stretches, too.”

That’s true. But much of that growth came before Amazon.com (AMZN) was taking a huge bite of mall tenants’ bottom lines, as it is today.

And the fact is, while some mall owners are having success re-leasing shuttered locations of Payless Shoe Source, RadioShack, Toys R Us and Bon-Ton Stores—just a few of the major retailers to go bankrupt last year—many still have a long way to go.

The numbers tell the tale: US malls are at their lowest occupancy since 2012 (according to CNBC), with 8.6% of their floor space sitting empty. This at a time when consumer spending and GDP are exploding!

The bottom line? The easy gains in mall REITs have been banked, so it’s a great time to look to these 3 cheap non-mall REITs instead:

REIT Pick No. 1: A 37% Dividend Grower on a Roll

Alexandria Real Estate (ARE) is still available for a lower price than you could snag it for in early January. But that won’t last after the trust’s second-quarter results poured in last week—a greatest-hits list that was the envy of the REIT world.

To wit: revenue jumped 19% year over year; adjusted per-share funds from operations (FFO; the best measure of REIT performance) spiked 9%; and management upped its full-year FFO forecast to between $6.57 and $6.63 a share, a big leap from the $6.02 ARE generated in 2017.

There’s more to come: unlike the average mall landlord, ARE is enjoying superb occupancy, with 97.1% of its operating properties taken up as of quarter-end. That’s thanks to its focus on the growing life-sciences industry: biotech firms working on the latest breakthrough drugs.

Don’t confuse “biotech” with “speculative”: ARE’s clients are some of the biggest in the business, including Novartis AG (NVS), Bristol-Myers Squibb (BMY), Sanofi (SNY) and the Massachusetts Institute of Technology.

Which brings us to the dividend, which gives you the best of both worlds: a decent yield (2.9%) and superb payout growth. Over the last five years, ARE’s dividend has surged 37%—with the payout regularly getting bumped up twice a year:

Annual Raises Are for Suckers

The kicker?

The payout is safe, at just 53% of FFO (low for a REIT) and reasonably priced: ARE trades at 19.4 times the midpoint of forecast FFO, cheap for a stock with rock-solid tenants and a surging dividend (which will drag the share price higher as it rises).

REIT Pick No. 2: A “Surprise” Special Dividend on the Way

Don’t let the name fool you: Boston Properties (BXP) goes way beyond Beantown, with 164 office buildings (48.4 million square feet) in Boston, New York, Los Angeles, San Francisco and Washington, DC.

It cuts its risk further by evenly spreading those properties out among those growing metropolises. Check it out:

Source: Boston Properties

Like Alexandria, BXP boasts top-notch clients, including ultra-steady Verizon (VZ): in Q2, BXP leased 440,000 square feet to a subsidiary of the telecom giant and broke ground on its 627,000-square-foot office tower in Boston (50% owned). Verizon will lease 70% of that space for 20 years.

Meantime, management is calling for serious FFO growth, with forecast FFO coming in at $6.36 to $6.41 a share in 2018, up from BXP’s previous estimate and way ahead of last year’s tally of $6.22.

Like ARE, BXP’s shares are below where they were in January, and they boast a similar valuation: 20.6 times forward FFO—again, reasonable for a REIT with an above-average dividend yield (2.4%) a growing payout (up 23% in the past five years) and a healthy balance sheet (its $10.3 billion of long-term debt is around half its market cap).

Plus there’s a hidden benefit no one pays attention to: BXP loves to drop outsized special dividends on shareholders, having done so in three of the past five years. With the “regular” payout accounting for a meager 49% of forecast FFO, another one of these surprise “specials” could come our way any day.

Let’s buy now, before that happens.

REIT Pick No. 3: Familiar Monthly Payer Still Looks Great

STAG Industrial (STAG) gets a lot of space in my Contrarian Outlook articles. There are several good reasons for that: the warehouse owner pays dividends monthly; offers the highest dividend yield of our 3 picks (5.2%); and delivers strong dividend growth, too (the monthly payout has jumped 18% in the last five years).

How does management do it?

For one, they follow one of the oldest rules in investing: diversification. Right now, STAG has 360 buildings across 37 states and doesn’t lean too heavily on any one of them. Its client list is 312 strong, and these tenants are well balanced across sectors, as you can see here:

A Diverse Industrial Player

Source: STAG summer 2018 investor presentation

And second, management is constantly re-evaluating the portfolio, selling properties when it feels their values have peaked and plowing the cash into better opportunities. In just the second quarter, STAG bought 15 buildings for $185 million while unloading five for $31.2 million, making a gain of $6.3 million on those sales.

Meantime, the crew at the top does a great job of attracting and retaining tenants, resulting in STAG’s sky-high 96.6% occupancy rate and helping boost FFO by 9.8% year over year in Q2.

And yet STAG is still overlooked, trading at the same price it did in January and at a bargain 15.8 times FFO. The dividend is safe, too, at just 81% of FFO. Grab this one and kick-start its fat monthly payout stream now.

My Favorite 7.7%-Paying REIT Is Also Cheap Now—But Not for Long

My favorite REIT pick for 2018 boasts a higher dividend than the 3 trusts I just told you about—an eye-popping 7.7% yield—so you’re starting out with a huge CASH gain right off the hop here.

This trust lets us play monopoly from the convenience of our brokerage accounts! It’s a well-connected commercial real-estate lender that does all the work for us—building a secure, diversified loan portfolio featuring offices, retail space, hotels and multi-family units.

Management then collects the monthly payments, deposits the checks and sends most of the profits our way as dividends!

This REIT’s mammoth 7.7% payout is easily covered by FFO, and its loan growth is soaring, setting us up for massive dividend hikes, too!

Big Loan Growth Today, Big Payout Growth Tomorrow

Plus this firm has smartly eliminated interest-rate risk because it uses floating rates. In fact, it’s actually set up to make more money as interest rates move higher!

More Income as Rates Rise

It’s the perfect play as the Fed heads for two more rate hikes this year, and three or more in 2019!

And as this REIT’s income—and dividend—march higher, they’ll haul the share price right up along with them.

I’m ready to share my full REIT-investing strategy, plus the names of my top REIT pick and another urgent buy with a 7.5% payout, too.

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