Chronicle Journal: Finance

4 Downgraded Stocks to Consider Selling

As 2020 comes to a close, there could be a lot of churn in portfolios. Investors will be looking to dump their losers and add the stocks with the best prospects for 2021. Patrick Ryan identifies four stocks that investors should consider selling: AZN, SWI, BZUN, and QDEL.

The POWR Ratings have been calculated, shining the spotlight on numerous stocks downgraded to “D” – "Sell" or “F” – "Strong Sell" status. The majority of those that have fallen to “F” grades in the POWR Ratings are in the oil and gas industry.

Expand your analysis to stocks that have been demoted to “D” grades and you will find there are plenty outside of the oil and gas industry. Unless the economy completely reopens in the months ahead, there is a good chance stocks from a wide array of industries will continue to be downgraded to “Sell” status, either declining or stagnating in value as economic activity gradually returns to normal.

Below, we provide a look at four of the latest POWR Rating downgrades: AstraZeneca (AZN), Quidel (QDEL), SolarWinds Corporation (SWI), and Baozun (BZUN).

AstraZeneca (AZN)

AZN has been in the news of late for its development of a potential coronavirus vaccine in tandem with Oxford University. AZN did not win the race, falling behind Pfizer (PFE) and Moderna (MRNA). However, AZN’s medicines are made and commercialized for purposes beyond vaccinating people against coronavirus. AZN also creates and commercializes medicines in areas ranging from renal and metabolism to cardiovascular, oncology, infection, and gastroenterology.

The POWR Ratings show AZN has an "F" grade in the Trade Grade component along with a "D" grade in the Peer Grade component. AZN is ranked 95th out of 240 stocks in the Medical - Pharmaceuticals category. The stock has a year-to-date price return of a mere 1.66%. The stock's three-month price return is -10.52%.

It appeared as though AZN had established a price floor at $50 yet the stock recently dipped below this level, likely because its coronavirus vaccine has not yet made it to market while Pfizer and Moderna vaccines are being jabbed into arms as you read these words. Furthermore, AZN’s recent merger with Alexion has been criticized as egregiously costly. Savvy investors will remain on the sidelines until some positive news comes out of the AZN camp.

Quidel (QDEL)

Rapid diagnostic tests to detect medical illnesses and conditions are essential to improving patient condition. QDEL makes and markets such tests with the overarching goal of treating chronic conditions that impact the well-being of women. In particular, QDEL’s products are designed to enhance the health and quality of life of women during pregnancy and osteoporosis. Furthermore, QDEL provides diagnostics for infectious diseases to boot.

The POWR Rating shows QDEL has "D" grades in the Peer Grade, Trade Grade, and Buy & Hold Grade components. QDEL is ranked 40th of 59 stocks in the Medical - Diagnostics/Research category. QDEL has a three-month price return of -12.85% along with a six-month price return of -15.13%.

Of the five analysts who have studied QDEL, three recommend it as a “Buy”, one advises holding and one advises selling.

SolarWinds Corporation (SWI)

Businesses of all different types need software that facilitates the management of networks, systems, and technology provided by the likes of SWI. However, the analysts are not bullish across the board on SWI. Of the seven analysts who have studied SWI, three recommend buying, three recommend holding, and one advises selling.

Check out the POWR Ratings and you will find SWI has an "F" grade in the Trade Grade component along with "D" grades in the Peer Grade and Buy & Hold Grade components. SWI is ranked 45th of 48 stocks in the Software - Business category. The stock has a year-to-date price return of -18.06% along with a three-month price return of -25.27%.

SWI's network monitoring was recently attacked by Russian hackers, creating a PR nightmare for the company. SWI is likely to lose customers during the fallout. Stay far away from this stock for at least a couple of quarters.

Baozun (BZUN)

BZUN develops e-commerce platforms that help brands manage sales, distribute goods, market to target clients, and provide customer service. BZUN had a nice run, moving from its March price of $22 to $46 in July. However, the stock has sold off in the months since, dropping down toward $30.

The POWR Ratings reveal BZUN has an "F" grade in the Trade Grade component along with "D" grades in the Industry Rank and Peer Grade components. BZUN is ranked 47th of 115 China stocks. BZUN has a year-to-date price return of -4.74% along with a six-month price return of -18.62%.

BZUN might be slightly overpriced considering its forward P/E ratio is hovering around 30. Prospective BZUN investors should remain on the sidelines until the company's margins expand.

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AZN shares were unchanged in after-hours trading Monday. Year-to-date, AZN has gained 1.80%, versus a 17.79% rise in the benchmark S&P 500 index during the same period.



About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.

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