Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.
One such stock that you may want to consider dropping is Fred's, Inc. (FRED), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness in FRED.
A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 5 estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to widen from a loss of 10 cents a share a month ago to its current loss of 18 cents.
Also, for the current quarter, Fred's, Inc. has seen 4 downward estimate revisions versus 1 revision in the opposite direction, dragging the consensus estimate down to 2 cents a share from 1 cent over the past 30 days.
The stock also has seen some pretty dismal trading lately, as the share price has dropped nearly 11.0% in the past month.
So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.
If you are still interested in the discount, variety store space, you may instead consider some better-ranked stocks including Burlington Stores, Inc. (BURL), Dollar Tree, Inc. (DLTR) and PriceSmart Inc. (PSMT). All these stocks hold a Zacks Rank #2 (Buy) and may be better selections at this time.
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FRED'S INC (FRED): Free Stock Analysis Report
BURLINGTON STORES INC (BURL): Free Stock Analysis Report
PRICESMART INC (PSMT): Free Stock Analysis Report
DOLLAR TREE INC (DLTR): Free Stock Analysis Report
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