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Over the last two weeks I’ve advised subscribers of my two growth newsletter advisories to lighten up their portfolios. Specifically, I’ve recommended selling three stocks, each of which has generated a gain of 20% or more, and has outperformed the S&P 500 over our holding period.
Here are the three stocks to sell now, and a few reasons I think the money could be better invested elsewhere:
Sell Recommendation No. 1: Growth and Value
Coca-Cola Enterprises (NYSE:CCE)is the European-based bottler and distributor for The Coca-Cola Co. (NYSE:KO). There’s nothing materially wrong with CCE. It’s a good, stable business and I don’t think it (or KO for that matter) is going anywhere.
But over the past two years Top Stock Insights subscribers have made 51% and have outperformed the S&P 500 by 15% with the stock. And with the competitive environment overseas denting sales expectations for Coca-Cola Enterprises, I don’t foresee significant upside in the stock over the next year.
It’s a good growth and value stock to put on the watch list for repurchase at a later date, if and when significant upside potential returns.
Sell Recommendation No. 2: Pure Growth
IHS (NYSE:IHS) sells research and information on a wide variety of industries, including energy, automotive and technology. Prior to advising Top Stock Insights subscribers to sell it last week, the stock had risen 23.5% since November 2013, and it outperformed the S&P 500 by 11% over that same time frame.
IHS reported earnings results this past week that came in ahead of expectations and revenue that met expectations. This is a quality company, and while the fundamentals don’t point toward a dramatic change in growth, the stock tends to trade at a premium, which always leaves the door open for a correction. And I think a pullback is overdue.
IHS corrected by 22% in late summer of 2011, and by 30% in early fall 2012. In 2013-2014 the stock has been on a steady uptrend with no significant corrections, bolstered by above-average revenue growth of 20%.
Looking forward into 2015 and 2016, I’m expecting revenue growth to moderate to 10%, maybe less, depending on what acquisitions IHS makes. So the combination of potentially slowing growth and an overdue correction tells me it’s time to lock in the profit. Like Coca-Cola Enterprises, I’ll put IHS on a watch list to potentially buy again, in this case when the downside risk moderates.
Sell Recommendation No. 3: Ultra-Aggressive Growth
Taipan Resources (TPN.V), (OTC:TAIPF) was an ultra-aggressive microcap oil explorer that I led 100% Letter subscribers intoin May 2013 at $0.29 a share. In February 2014 I recommended selling half of the position at $0.58 to lock in a 100% gain. And since then we had been sitting on the remaining half, waiting patiently for the company to get its first drilling rig operating in Kenya.
But with a 38% gain on the remaining half, we walked away. Since we’ve owned Taipan, the company’s working interest in its two exploration blocks in Kenya has been whittled down to 20% (Block 1) and 30% (Block 2B). While the farm-downs brought in much-needed cash, they also reduced ownership in any potential future oil royalties.
Plus, the chance of success is relatively low for the first wells (roughly 10% to 15%). And with drilling dates getting pushed back, the stock has run out of steam. I’ll keep watching Taipan, too. It’s an interesting stock, and if drilling catalysts start to line up again, it could be worth rolling the dice again. I expect that it’ll be early 2015 before excitement starts to build though, so for now I want to remain on the sidelines.
How the iPhone 6 unveiling impacts mobile
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