Before I give you a short list of penny stocks to sell, it’s good to remind investors what we mean by penny stocks. This category used to be reserved for stocks that were trading for less than one dollar (i.e. for pennies), but has been expanded to include any stock trading for less than five dollars.
Traders love penny stocks because they don’t need a large trading account to get started. Penny stocks also offer the volatility to profit from stocks no matter what direction they’re moving.
But what about investors who are looking at penny stocks as a long-term investment? The ability to accumulate shares in stocks at an ultra-low price can seem too good to pass up. And they do have the potential to deliver outsized returns…if you’re invested in the right stocks.
This article, however, is not about finding the right stocks—it’s about avoiding the wrong ones. At a time of extreme market volatility, penny stocks can see sharp price movements. And when the bears are in control, those losses can add up quickly.
That’s a risk you don’t need to take right now. Stay away from these three penny stocks to sell.
Banco Santander S.A. (BSBR)
Banco Santander S.A. (NYSE:BSBR) is a commercial bank headquartered in Brazil. The commercial banking sector has been hit hard by rising interest rates, and that’s evident in the performance of BSBR stock.
The company’s stock is down 8% in 2023. But it’s down 25% in the last three months, and 10% in the month ending October 3. That’s significant because it was in August when the Brazilian central bank announced a 50 basis point drop in the country’s interest rate. That was followed by an additional 50 basis point drop in September to bring the interest rate down to 12.75%
Prior to the rate cuts, the last time the country’s interest rates were at 13.75% was in 2016. At that time, BSBR stock was trading much lower than its current level, so investors my still believe the stock is overvalued.
Out of 12 analysts that have offered recent ratings on BSBR stock, five give the stock a Sell or Strong Sell rating. It bears repeating that it takes a lot for analysts to issue a Sell or Strong Sell rating. When you see this kind of consensus opinion forming, you would do well to invest accordingly.
Telefonica (TEF)
I’ll start by saying that Telefonica (NYSE:TEF) does have an appealing dividend with a 5.87% yield. The Spanish telecommunications company’s revenue is solid, but not spectacular. But that’s to be expected in a slumping economy.
The news that Saudi Telecom Co. Group acquired a 9.9% stake in Telefonica is what makes this a penny stock to sell at the moment. That represents 4.9% of the share capital of the company. It is likely to draw the scrutiny of the Spanish government, which can block acquisitions of over 5% for companies they consider important to the country’s national security or defense.
TEF stock is down 4.3% in the last month. That’s chipped away at the company’s gains in 2023, and the stock may have further to fall.
Overall sentiment remains bullish on TEF stock. However, four analysts give the stock a Sell or Strong Sell rating. The analyst firm, BNP Paribas, downgraded the stock from Neutral to Underperform in mid-September.
Wipro (WIT)
Wipro (NYSE:WIT) is the last stock on this short list of penny stocks to sell. The company is headquartered in India. The company’s business model is one in which it provides companies with information technology professionals that help the company program AI language models.
At a time when AI solutions, and particularly generative AI solutions, are red hot, Wipro would seem to be a no-brainer stock to buy. The company reported that the IT services has grown at a compound annual growth rate of over 6% in the last 10 years. And the company is forecasting 11% earnings growth in the next 12 months.
However, analyst sentiment suggests that much of the company’s growth is already priced in. The company’s latest earnings reports show solid results. But there’s nothing that leads you to believe it will be able to keep up with past earnings growth. And as artificial intelligence capabilities expand, the company’s services are likely to become redundant.
On the date of publication, Chris Markoch did not have (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.