3 Stocks to Absolutely Not Buy in May

Examining 3 stocks that have historically underperformed in May

Apr 30, 2015 at 8:46 AM
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Just yesterday, with help from Schaeffer's Senior Quantitative Analyst Rocky White, I took a look at three stocks that could rally next month. However, there's always two sides to a coin, so I decided to examine some names that have been a little less successful in May. Using data from White, I narrowed in on biker brand Harley-Davidson Inc (NYSE:HOG), electric automaker Kandi Technologies Group Inc (NASDAQ:KNDI), and gaming giant Wynn Resorts, Limited (NASDAQ:WYNN).

Below, you'll find a list of 25 of the worst performers in May. In order to qualify, the stocks had to be positive no more than 20% of the time in the last 10 years.  Following the list, you'll also find more in-depth commentary on the three aforementioned names -- HOG, KNDI, and WYNN -- and a case for why they could decline next month.

Worst Stocks in May

Harley-Davidson Inc (NYSE:HOG)

HOG has been less-than-impressive in 2015, dropping 13.7% to close at $56.85 on Wednesday. The stock was recently hit by a disappointing turn in the earnings confessional, and is now trading near its annual low of $54.22 from mid-October. It doesn't appear things will get any better next month, if history is any guide, as HOG has declined in eight of the past 10 Mays -- with a typical decline of 3.9%.

HOG May Performance

Despite HOG's technical struggles, there's still a fair degree of optimism surrounding the equity. Half of the analysts tracking the shares consider them a "buy" or better, and the other half considers them a "hold" -- with not a single "sell" rating to be found. Also, the stock's average 12-month price target of $66 represents expected upside of 16% to the current price. In other words, the stage may be set for a round of downgrades and/or price-target cuts.

Kandi Technologies Group Inc (NASDAQ:KNDI)

KNDI has underperformed in 2015, as well, giving back 12.8% to trade at $12.22. In fact, the stock lost 0.7% yesterday on reports China will cut subsidies by more than expected on the type of alternative energy vehicles the company manufactures. The month ahead could be brutal, as well, if past is prologue. Over the past seven Mays in which KNDI has traded publicly, the shares have been positive just once, and averaged a single-month drop of 14.1%.

KNDI May Performance
 
Elsewhere, short sellers remain firmly in control. Over 19% of KNDI's float is dedicated to short interest, representing more than a week's worth of trading, at typical daily trading levels. As the shorts continue to pile on, the stock could be pressured even lower.

Wynn Resorts, Limited (NASDAQ:WYNN)

WYNN got demolished yesterday -- and touched a two-year low of $108.27 -- following a first-quarter earnings flop. Taking a step back, the security has shed almost 27% year-to-date to rest at $108.77. What's more, the stock has been positive just one time over the past 10 Mays, and on average, slides 5.8% during the month.

 WYNN May Performance

Nonetheless, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been betting bullishly on WYNN. The equity's 50-day call/put volume ratio across this trio of exchanges is 1.60 -- in the 86th percentile of its annual range. A capitulation among these bullish holdouts could result in headwinds.

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