I can hardly believe it, but we’re already halfway finished with 2016. With the first-quarter earnings season now behind us, we’re now heading into the bumpy summer months. As volume grows lighter between June and September (and particularly light in August), the summer shenanigans ensue. This year, I’m looking for a somewhat smoother summer given that it’s a Presidential election year.
But I wouldn’t be surprised to see some bumpiness from time to time, especially as second-quarter earnings season kicks off. While this will present a good buying opportunity for the savvy stock pickers, this also means that it’s time to watch out for what I like to call “slippery slope” stocks. More on that in a moment.
The best way to prepare for hedge against volatility is by realigning your portfolio for maximum performance. If you want to avoid many of the headaches that come with summer trading, start by trimming the dead weight in your portfolio. Ensure smooth and steady returns by sticking with more conservative stocks.
And you can do this by checking your stocks in Portfolio Grader. When you run your holdings through this screening tool, take note of each stock’s Quantitative Grade (the current level of institutional buying pressure) and each stock’s Fundamental Grade (a weighted blend of eight financial metrics). Also check which of your stocks are rated as Conservative, Moderately Aggressive or Aggressive. Shoot to have 60% of your holdings in Conservative stocks, 30% in Moderately Aggressive and 10% in Aggressive.
I can’t stress this last point enough because aggressive stocks are the first one to take a beating in a correction, so you’ll want to limit your exposure to these “spicier” stocks. To get you started, here are 11 moderately aggressive and aggressive-rated stocks you’ll want to steer clear of in the coming months.
|Symbol||Company Name||Quantitative Grade||Fundamental Grade||Total Grade|
|BTE||Baytex Energy Corp.||D||C||D|
|DDD||3D Systems Corp.||D||D||D|
|JOY||Joy Global Inc.||D||D||D|
|KS||KapStone Paper and Packaging Corp.||D||C||D|
|MUR||Murphy Oil Corp.||C||D||D|
|OAS||Oasis Petroleum Inc.||D||D||D|
|SWN||Southwestern Energy Co.||D||D||D|
|WLL||Whiting Petroleum Corp.||D||D||D|