Time to Sell: These 3 Stocks May Plunge Ahead of 2024

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Not every stock is a winner, and exiting positions before they get worse can shield you from losses. Granted, you shouldn’t exit a stock just because of short-term headwinds that 5-10 years can fix. However, the consumer dynamic is shifting, and some companies get left behind or face multi-year recoveries. It’s important to consider the current economic environment and how companies will adjust when considering the stocks to sell.

Some companies are naturally positioned to do better in economic downturns than others. People still need to buy the essentials, but discretionary spending takes a hit, especially luxury spending. These three stocks look concerning heading into 2024.

Home Depot (HD)

Home Depot (HD) sign backdropped by blue sky
Home Depot (HD) sign backdropped by blue sky

Source: Rob Wilson / Shutterstock.com

Home Depot (NYSE:HD) has been a reliable blue-chip stock for several years. Shares have gained 65% over the past five years but are down by roughly 10% year-to-date. Most of those declines have happened over the past week.

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Retail theft still looms, but it’s not the biggest headwind the company faces. Housing demand is falling sharply and is currently at its lowest since 2010. Home Depot stock still performed well despite shortening housing demand in 2022, but it’s been catching up to the company.

Home Depot has posted two consecutive quarters of declining year-over-year revenue and earnings growth. The quarter before those two featured revenue and earnings growth below 0.5% year-over-year. 

Inflation remains a threat that can dampen consumer spending. Home Depot already tipped investors off on this risk, projecting sales and comparable sales to decline in Fiscal 2023. The company has noticed a continued decrease in discretionary spending on big-ticket items.

Best Buy (BBY)

A photo of a Best Buy store front.
A photo of a Best Buy store front.

Source: Ken Wolter / Shutterstock.com

Best Buy (NYSE:BBY) faces similar obstacles as Home Depot but has a lower market profile. While Home Depot primarily competes with Lowe’s (NYSE:LOW), Best Buy competes with the tech giants that have set up their retail operations.

Best Buy shares are down 15% year-to-date and have been flat over the past five years. The company has a 12 P/E ratio and a 5.35% dividend yield, but those metrics are low for plenty of reasons.

The company has posted several consecutive quarters of year-over-year revenue and earnings declines. The drops are more dramatic than other companies that generate most of their business from retail properties.

Best Buy reported a 6.2% year-over-year drop in comparable sales and a GAAP diluted EPS of $1.25. That EPS doesn’t offer much wiggle room for the quarterly dividend distribution of $0.92 per share. It represents a risky 73.6% dividend payout ratio.