Do you own any toxic stocks in your portfolio? The odds might be higher than you think.
Fact is, the big index stats don't tell the whole story for 2016. While the S&P 500 is up by mid-single digits year to date, one in five S&P components is actually down 8% or more over that same period. That means there's a pretty substantial chunk of the broad market that's posting downright awful performance this year.
And simply not owning the very worst performers could do more for your returns than owning the best ones as we enter the final stretch of 2016.
To figure out which stocks to steer clear of, we're turning to the charts today for a technical look at five stocks that could be toxic for your portfolio in the month ahead.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technical analysis can help top traders make consistently profitable trades and can aid fundamental investors in better entry and exit points.
Just so we're clear, the companies I'm talking about today are hardly junk.
By that, I mean they're not next up in line at bankruptcy court -- and many of them have very strong businesses. But that's frankly irrelevant to what happens to their stocks; from a technical analysis standpoint, sellers are shoving around these toxic stocks right now. For that reason, fundamental investors need to decide how long they're willing to take the pain if they want to hold onto these firms in the weeks and months ahead. And for investors looking to buy one of these positions, it makes sense to wait for more favorable technical conditions (and a lower share price) before piling in.
So, without further ado, let's take a look at five "toxic stocks" to sell.