Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

5 Stocks to Sell Right Now

By Sean Williams - Dec 31, 2020 at 5:51AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Today's the final day for tax-loss harvesting in 2020.

Congratulations, investors! You've made it! We're less than 24 hours from closing the curtain on 2020, which for most folks can't come soon enough.

Although the stock market was incredibly volatile this year, 2020 will go down as yet another green year. In fact, it'll mark the 38th time in the past 46 years that the benchmark S&P 500's total return (including dividends) was positive. But this doesn't mean all stocks fared well.

With this being the last day of the year to take advantage of tax-loss harvesting, I'd suggest selling the following five poorly performing stocks right now.

A businessman pressing the sell button on a digital screen.

Image source: Getty Images.

Aurora Cannabis

U.S. marijuana stocks had a pretty good year. However, the same can't be said of our neighbors to the north, which are still struggling with federal and provincial regulatory issues. Having lost two-thirds of its value in 2020 and 88% over the trailing three-year period, it's time for investors to take their lumps and move on from Aurora Cannabis ( ACB -2.49% ).

Perhaps the biggest issue with Aurora is its complete disregard for its shareholders. For the past six years, the company has financed its day-to-day operations and acquisitions by selling its own stock. Since April 2019, it's done this via at-the-market (ATM) offerings. The company has already completed separate ATM offerings of $400 million and $250 million, and recently introduced another $500 million ATM offering. The point is that Aurora's outstanding share count has ballooned over 11,800% in the past six years. As this share count rises, existing investors are being diluted into oblivion.

Investors should also be skeptical of management's efforts to reach positive earnings before interest, taxes, depreciation, and amortization (EBITDA). Aurora's executives have moved the goalpost to reach positive EBITDA on numerous occasions, even with stringent cost cuts, which have included closing five smaller facilities and halting construction on two large projects. It's a pot stock worth selling right now.

The now-retired Nikola Badger electric pickup truck parked on a road under a cloudy sky.

The now-retired Nikola Badger EV pickup truck. Image source: Nikola.


Even though its shares are technically up 33% in 2020, the vast majority of investors who piled into electric-vehicle (EV) stock Nikola ( NKLA -1.47% ) did so well after it began its mid-summer romp higher. Over the past six months, it has shed 78% of its value.

The Nikola story looked promising in September when it appeared close to securing a $2 billion equity investment from General Motors (NYSE: GM). It was expected that General Motors would handle the production of Nikola's first mass-produced EV pickup truck, the Badger. But after many months of discussions, the deal fell through. GM and Nikola are still working together in some capacity, but there's no equity investment involved, and GM isn't building the Badger for Nikola. In fact, Nikola retired the Badger before any vehicles were produced.

To make matters worse, Nikola is being probed by the Securities and Exchange Commission (SEC) following allegations from short-side firm Hindenburg Research that Nikola and its founder, Trevor Milton, engaged in fraud. It's worth pointing out that Milton also stepped down from his role as executive chairman via a middle-of-the-night tweet, which is odd, to say the least.

Nikola is a stock that investors can confidently sell right now to preserve their remaining capital.

An American Airlines commercial plane pulling up to a terminal gate.

Image source: American Airlines.

American Airlines Group

Another stock that's a long overdue sell is American Airlines Group ( AAL -2.94% ). The airline industry is a capital-intensive, low-margin operating model, and American is very likely the worst of the worst in this truly avoidable industry.

One of the most notable issues for American Airlines is its balance sheet. It's no secret that the coronavirus outbreak is disrupting air travel like never before, and it's unclear when travelers will return to the skies. American has had to raise capital and seek coronavirus disease 2019 (COVID-19) relief loans to ensure it has enough money to navigate its way through this mess. However, its balance sheet now features about $33 billion in net debt and over $41 billion in total debt. Even if it survives this recession, the company will be strangled by its debt for years to come.

As my Foolish colleague Adam Levine-Weinberg pointed out, American Airlines also has a history of wasting investors' money. Back in 2018, it chose to retire commercial planes well before their useful period was up. Modernizing its fleet  before it was needed is yet another reason American's debt load is higher than all other airline stocks.

Now with no dividend or share buybacks, American Airlines' stock is wholly avoidable.

Two oil pumpjacks operating at sunrise.

Image source: Getty Images.

Occidental Petroleum

Oil stocks were also clobbered by the COVID-19 pandemic. Lockdowns during the spring in the U.S. and other developed countries caused crude oil demand to crater and, for a brief period, pushed West Texas Intermediate futures into negative territory. This all spells bad news for U.S. shale producer Occidental Petroleum ( OXY -1.60% ), which is down 57% in 2020 through this past weekend.

Occidental's acquisition of Anadarko, which closed in 2019, simply couldn't have come at a worse time. To be fair, no one could have foreseen the unprecedented disruption that COVID-19 would cause in the oil industry. Nevertheless, it's left Occidental with over $41 billion in outstanding debt, which threatens the long-term viability of the company. Without major divestitures and significant cost-cutting, it's unclear if Occidental will survive to see the long term.

What's more, Occidental Petroleum took a $10 billion investment from Warren Buffett's Berkshire Hathaway in 2019 to help facilitate the Anadarko buyout. In return, Berkshire received preferred stock with an 8% annual yield. Occidental either has to fork over $200 million in cash each quarter to Buffett's company or issue common stock to Berkshire Hathaway in the amount of $200 million. 

Suffice it to say, Occidental is in some serious trouble, and selling now to preserve what's left of your initial investment might be a smart idea.

A lab researcher using a multi-pipette device to add liquid samples to a row of test tubes.

Image source: Getty Images.


Lastly, investors should strongly consider dumping biotech blue chip Biogen ( BIIB -0.67% ), which has been whipsawed by Food and Drug Administration (FDA) panel votes and legal battles in 2020. Shares are down 16% through this past weekend.

One of the biggest cash-flow drivers for years has been multiple sclerosis (MS) blockbuster drug Tecfidera. Through the first nine months of 2020, Tecfidera has generated about $3.2 billion in sales. The problem is that Biogen lost a key patent battle in court earlier this year, paving the way for generic drugmakers to launch copycats of its MS blockbuster. Previously expected to be protected through 2028, Tecfidera's cash flow could be squeezed significantly moving forward. 

The other issue for Biogen is that the experimental Alzheimer's disease drug aducanumab failed to find an audience with an FDA panel. Although the FDA is not required to follow the advice of its panel, the panel overwhelming voted against multiple questions regarding aducanumab's efficacy. 

With little in the way of near-term catalysts, it could be time to say goodbye to this previous cash cow.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Biogen Inc. Stock Quote
Biogen Inc.
$234.53 (-0.67%) $-1.58
Occidental Petroleum Corporation Stock Quote
Occidental Petroleum Corporation
$29.58 (-1.60%) $0.48
American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
$17.22 (-2.94%) $0.52
Aurora Cannabis Stock Quote
Aurora Cannabis
$6.28 (-2.49%) $0.16
Nikola Corporation Stock Quote
Nikola Corporation
$10.08 (-1.47%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.