December 2, 2021

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7 Stocks to Sell in May and Go Away

May means it’s time to sell these stocks.

One of the oldest adages on Wall Street is “sell in May and go away.” Stocks have historically underperformed during the six-month stretch from May to November, hence the expression. Unfortunately, the “sell in May” approach has gotten mixed results in recent years and may no longer be a viable strategy. But regardless of the performance of the overall market over the next six months, there are still plenty of stocks that investors should consider selling this May. Here are seven stocks to sell in May or any other month of the year, according to Bank of America analysts.

Accenture (ticker: ACN)

Accenture is a global information technology services company that derives less than half its revenue from North America. When Accenture cut its fiscal 2020 guidance in late March, analyst Jason Kupferberg said he did not think the updated guidance was conservative. The updated guidance calls for revenue growth to bottom in the fiscal third quarter at between negative 2% and positive 2%, less than half the peak-to-trough deceleration the company experienced during the financial crisis. Kupferberg says project-based business visibility is currently extremely limited. Bank of America has an “underperform” rating and $154 price target for ACN stock.

Caterpillar (CAT)

It makes sense for investors to consider buying the dip in Caterpillar, the world’s largest construction equipment maker. The company has a strong balance sheet and pays an appealing 3.8% dividend. However, analyst Ross Gilardi says it is extremely unlikely for Caterpillar shares to outperform while dealer sales are dropping, and he anticipates further dealer deterioration in the second quarter. Caterpillar earnings per share were down 45% in the first quarter, and Gilardi says the worst is yet to come in the second quarter. Bank of America has an “underperform” rating and $115 price target for CAT stock.

U.S. Bancorp (USB)

U.S. Bancorp is the fifth-largest U.S. bank, and in its recent earnings report, management was adamant that the company has a strong enough balance sheet to maintain its 4.9% dividend and absorb future credit losses even in a severe economic downturn. Analyst Erika Najarian says U.S. Bancorp is a quality company, but its premium valuation relative to its banking peers doesn’t fully reflect the risk to the company’s pre-provision net revenue. Bank of America has an “underperform” rating and $35 price target for USB stock.

Illinois Tool Works (ITW)

Illinois Tool Works produces fasteners, consumables and other specialty industrial products. Gilardi says the stock is relatively defensive and the company is highly diversified. Unfortunately, the company’s restaurant business has been pummeled by social distancing shutdowns. Gilardi says the food equipment market could decline by 30% in 2020. While grocery, hospital, school and military demand should remain relatively stable, Gilardi says Illinois Tool’s overall demand will likely drop sharply in 2020. He says the stock’s performance could lag given the challenging environment. Bank of America has an “underperform” rating and $130 price target for ITW stock.

Biogen (BIIB)

Biotech giant Biogen develops and markets treatments for multiple sclerosis, tumors and inflammatory diseases. Analyst Geoff Meacham says Biogen’s first-quarter earnings report was impressive, including its decision to maintain 2020 guidance. However, he says the company’s announcement that the biologics license application filing date for Alzheimer’s disease treatment aducanumab has been delayed from early this year to the third quarter is troubling. Meacham says aducanumab is the biggest future value driver for the stock, and Biogen provided no reason for the delay. The Food and Drug Administration is likely prioritizing the current health crisis for now. Bank of America has an “underperform” rating and $245 price target for BIIB stock.

Sherwin-Williams (SHW)

Sherwin-Williams is the second-largest coatings company in the world, generating more than 75% of its business from North America. Analyst Steve Byrne says he is more bullish on “do it yourself” stocks than “do it for me” stocks. A recent survey of paint contractors suggests a large number of commercial and residential project cancellations through the end of 2020, which is bad news for Sherwin-Williams. Byrne says Valspar and HGTV products could see a demand bump, but the company’s Americas segment derives only about 15% of revenues from its DIY sales. Bank of America has an “underperform” rating and $496 price target for SHW stock.

Illumina (ILMN)

Illumina is a life sciences company that provides instruments, consumables and services used in genetic analysis. Analyst Derik de Bruin says first-quarter sales were better than feared, and Illumina’s strong balance sheet provides capital deployment opportunities. But lab shutdowns and a potential shift in funding due to the health crisis create uncertainty. Illumina recently abandoned its $1.2 billion buyout of Pacific Biosciences (PACB). In addition, de Bruin says emerging competitors could continue to pressure pricing, and Illumina has risks tied to execution and visibility. Bank of America has an “underperform” rating and $220 price target for ILMN stock.

Seven stocks to sell in May and go away:

— Accenture (ACN)

— Caterpillar (CAT)

— U.S. Bancorp (USB)

— Illinois Tool Works (ITW)

— Biogen (BIIB)

— Sherwin-Williams (SHW)

— Illumina (ILMN)

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