Optimizing portfolios may require scanning stocks to sell before a certain period. Understanding which stocks might provide hazards is more important than ever as July 2024 approaches. Businesses frequently encounter particular obstacles. These may result from changing market conditions, operational problems, or strategic errors that, over time, reduce market value. In short, finding the stocks to dump before July 2024 requires proactive portfolio management rather than pessimism.
These three companies should be considered for divestiture before the middle of 2024. Every company has challenges, such as being vulnerable to currency changes that impact profits, declining sales in specific categories, and being exposed to unstable semiconductor markets and geopolitical threats. Looking at these examples, one may find geopolitical risks, obstacles unique to a certain industry, and operational inefficiencies. These insights enable portfolios to be in line with current market circumstances and provide protection against future financial downturns.
Nu Skin (NUS)
Nu Skin (NYSE:NUS) operates in the personal care and wellness industry. Q1 2024’s gross margin decreased from 72.3% to 70.5% from the previous year’s quarter. A weaker foreign currency position raises the cost of items sold when the top line is translated back to the reporting currency. The gross margin for the Nu Skin core business increased from 76.4% in Q1 2023 to 76.9% (+0.5%).
Moreover, the operating margin for the quarter came to 2.1% or 3.8%, with restructuring expenses subtracted. This is a drop from the previous year’s 3.3%, or 5.4%, without restructuring expenses. Despite cost-cutting efforts, the reduced operating margin shows that FX pressures have a real impact on profitability. The requirement to handle debt in different currencies is also a reason for the rise in interest expenditure from $4.9 million in the previous year to $7.3 million in the current quarter. Hence, this underscores the financial burden FX fluctuation can bring under the ongoing higher-for-longer environment.
Overall, Nu Skin’s inclusion on the list of stocks to sell before July 2024 list stems from its vulnerability to foreign exchange fluctuations.
Worthington (WOR)
Worthington (NYSE:WOR) is a diversified metals manufacturing company. Worthington’s building products category experienced the most significant decline in net sales, dropping by $35.8 million in Q3 fiscal 2024. Specifically, reduced volumes, an unfavorable product mix, and lower average selling prices led to this decline. This segment’s adjusted EBITDA dropped from $58 million in Q3 2023 to $53 million. This is a $5 million decline attributed to lower sales and an unfavorable product mix that hurt profitability.
Further, comparing the performance from the previous year to breakeven, Sustainable Energy Solutions reported an adjusted EBITDA loss of $3 million. The segment’s volumes remained too low to absorb fixed expenses, causing this negative EBITDA, even with an 11% rise in net sales. Due to reduced gross profit and increased selling and administration expenditures, the operating income for Q3 decreased to $8 million on an adjusted basis from $16.9 million in Q3 2023, indicating a sizable decline in profitability.
To sum up, Worthington faces challenges due to declining sales caused by lower volumes, pricing pressures, and an unfavorable product mix, putting it on the list of stocks to dump before July 2024.
Axcelis (ACLS)
Axcelis (NASDAQ:ACLS) designs, manufactures, and services ion implantation and processing equipment for semiconductor chips. While Axcelis’spower segment is resilient and may continue to grow throughout the year, other market segments are struggling and may not recover until 2025. With 59% of total sales in the first quarter of 2024 coming from China, the country represents a significant geographic market for Axcelis. Because of this high top-line concentration, the company is more exposed to the geopolitical and economic risks associated with the Chinese market.
Additionally, fewer sales shares go to the US, Japan, Europe, Korea, and the rest of the globe (17%, 7%, 4%, 4%, and 9%, respectively), suggesting a persistent lack of geographic diversity. Moreover, fluctuations in gross margins based on product mix indicate vulnerability. For instance, changes in the product mix and the shutdown of assessment systems—which typically provide lower profits—will likely result in variations in the gross margins for each quarter.
To conclude, Axcelis faces market segment challenges, particularly in memory markets like DRAM and NAND, with significant geopolitical risks in China posing potential threats. If you are looking for stocks to dump out of your portfolio, start here.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.