If not, you would have some very good reasons to be skeptical. A record run essentially uninterrupted has taken stocks to new highs.
But nothing goes up forever.
Now, investors must digest the very real possibility that federal bank bond-buying may begin to taper as early as September.
Is it all a mirage?
It could be, and if so, this market could crumble fast.
If that weren’t enough, August and September are simply historically poor months to be an investor in the market.
Taking some money off the table now would seem to be a rational strategy.
So what stocks should we be selling?
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Over the years, I have had great success identifying winners and losers in the market using what I like to call the P/E Gap.
Put simply the P/E Gap is the difference between the price-to-earnings ratio of a stock and the expected profit growth rate.
I use the P/E Gap to identify stocks to buy and stocks to sell.
With respect to stocks to sell, what I look for is a stock with a high P/E ratio and a low growth rate. While there are other variables to include in the analysis, seeing such a dynamic tells me a particular stock is expensive.
In fact, a list of 10 of the widest P/E Gap stocks where the P/E ratio is higher than the growth rate as of the end of last year has in aggregate underperformed the market by some 400 basis points.
These are the stocks I would be looking to liquidate today. From that list as of the end of last year, here are five stocks to consider selling now: