Throughout 2023, non-farm payroll jobs were overstated by 730,000. This discrepancy trend is continuing into 2024. While the latest jobs data for May reported 272,000 payroll job gains, the household survey showed an opposite picture of over 400,000 jobs lost, suggesting it may be time to identify potential stocks to sell.
Even though gross domestic product (GDP) growth is somewhat misleading because it accounts for government spending, it slowed to a rate of 1.6% annualized in Q1 versus an expected 2.4%. On top of that, government spending included in GDP growth comes from a $1.2 trillion budget deficit in the current fiscal year, a $38 billion uptick from a year ago. In May, the deficit totaled $347 billion, a 44% increase year-over-year (YOY).
For investors who think these figures are not painting a healthy economic picture, here are three stocks to sell and take profits from now before they crash.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) seems like a relentless success story riding the artificial intelligence (AI) wave. With a year-to-date (YTD) growth of 181%, it is difficult for shareholders to give up that momentum. After the 10-to-1 stock split, Nvidia further neutralized the psychological barrier of the stock seeming too expensive, demonstrated by a 43% valuation boost in the last 30 days.
Yet, even with a 262% YOY reported revenue growth in May’s earnings, does Nvidia’s upward trajectory align with reality?
For that to be the case, feeding data to AI models would have to lack a ceiling. In turn, data centers would be needed to process the data. But this academic study published in April clearly points to diminishing returns. The authors share that their study reveals “an exponential need for training data which implies that the key to ‘zero-shot’ generalization capabilities under large-scale training paradigms remains to be found.”
In other words, for AI models to tackle new tasks, there is not only lack of sufficient and pertinent data for training, but the data fed would vastly outgrow the practical cost-benefits in the real world. Effectively, the current brute-force method of AI training, necessitating Nvidia’s data center supply, is unlikely to push the AI envelope.
This would point to an AI performance plateau. And even if a new methodology breaches that plateau, the new approach needed would limit Nvidia’s data center revenue growth.
That reality could sink in sooner rather later. Accounting for the new stock split, NVDA stock’s average over the last 52-weeks is $63 per share. At the present price of $135 per share, this would make NVDA an excellent candidate for one of the top stocks to sell right now.
Boeing (BA)
Boeing (NYSE:BA) has seen plenty of negative headlines over the last year. Rightfully so, many investors saw this as an opportunity to buy the BA dip. After all, Boeing is indispensable due to its military contracts, commercial aviation duopoly and aerospace contracts with NASA.
However, following the revelation that both Boeing and Airbus (OTCMKTS:EADSY) may have utilized titanium with fake documentation, a buying the dip strategy could be questionable. This could point to the material being of lesser quality than it needs to be which could cause future problems that continue tanking the stock.
More importantly, the false documents may have been used because sanctions on Russian titanium necessitated a new supplier from China. Considering all other issues plaguing Boeing, this geopolitical situation points to a multi-year period of systemic problems for the company.
Emirates president Tim Clark said Boeing may need years to recover, highlighting the long-term nature of these issues. In fact, in the last five years, Boeing’s shares have fallen over 52%, underscoring the company’s prolonged struggle to regain investor confidence.
At the present price of $175, BA shares are significantly over their 52-week low of $159.70, making this a safe, precautionary exit.
Simon Property Group (SPG)
A real estate investment trust (REIT), Simon Property Group (NYSE:SPG) beat earnings per share (EPS) estimates for three consecutive quarters. The Q1 quarter came with a double-digit surprise of 27% at $3.56 reported versus $2.80 estimated.
However, neither residential or commercial real estate is looking especially healthy. Focused mainly on retailers, entertainment providers, shopping centers, restaurants and other commercial segments, SPG is reliant on the performance of the commercial real estate sector.
And delinquency rate on commercial real estate loans is swinging upward, even more so than during the lockdown period circa March 2020. With a potential elevated vacancy trend, SPG would face a severe drop in rental income while still having to cover the operating expenses for the properties.
To avoid SPG’s potential write-downs and dividend reductions, investors should consider it as one of stocks to sell on a good dividend note.
YTD, SPG stock is up 2.7%. At a present price of $147, SPG stock is above its 52-week average of $131.56 per share.
On the date of publication, Shane Neagle 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.