Stocks to sell

By the time the United States Federal Reserve convened for its Federal Open Markets Committee (FOMC) meeting in December, federal economic data had already pointed to a sustained cooling in consumer prices. The Consumer Price Index, for example, only rose 3.2%, from a year-over-year (Y/Y) perspective, in October, which was approximately 590 basis points lower than the peak price increase of 9.1% Y/Y in June 2022. That is to say, despite a slight, unexpected rise in CPI in August, consumer prices continued their sluggish trend downward. This led us to create this list of stocks to sell.

Here are three stocks to sell that investors should drop as the Fed’s fight against inflation winds down.

Cal-Maine Foods (CALM)

Source: Poravute Siriphiroon / Shutterstock.com

Cal-Maine Foods (NASDAQ:CALM) is the largest producer of eggs in the U.S., selling its products under well-known brands like Land O’Lakes and Egg-Lands Best.

Eggs are a staple food for many Americans, and their prices had more than doubled in January 2023. However, this did not deter consumers from buying them, and Cal-Maine Foods has benefited from the increased demand and pricing power. From Q3 2022 to Q1 2023, Cal-Maine’s quarterly revenues increased year-over-year by triple-digit figures. Q2 2023 earnings were more sluggish on falling eggs prices but still came in the double digits at more than 16%.

Due to sluggish growth in egg prices, Cal-Maine’s shares only rose a tepid 14.5% in 2023. As food prices continue to fall, investors should expect Cal-Maine’s revenue growth rate to fall precipitously in coming quarters.

WK Kellogg (KLG)

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It’s quite likely readers have heard of this entry. Kellogg (NYSE:KLG) offers ready-to-eat cereal products primarily under the Frosted Flakes, Special K, Froot Loops, Raisin Bran, Frosted Mini-Wheats, and Kashi brands. To no surprise, the cereal company did well in 2022 as inflation soared through the roof. According to Koyfin, revenue growth was approximately 10% year-over-year.

Unfortunately, similar to the Cal-Maine Foods, Kellogg could also suffer from inflationary pressures falling in 2024. Dented food prices will likely slow Kellogg’s revenue growth which has already been sluggish in recent years. Lower than expected revenue could place selling pressure on Kellogg’s shares and crush investors’ returns.

Performance Food Group (PFGC)

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The food distribution sector is competitive and dynamic, and Performance Food Group (NYSE:PFGC) could be a decent value investment in the sector.

The food distributor is a food service, snacking and pre-packaged convenience food distribution behemoth. The company with an expansive product portfolio serves more than 125,000 customers across various segments, including restaurants, schools, hospitals, hotels, vending machines and convenience stores.

Performance Food Group revenue growth over the past years has been in the strong double-digits, driven by elevated selling prices and volume. Inflation falling as it has will likely continue to putting pressure on PFG’s revenue growth rate.

On the date of publication, Tyrik Torres did not hold (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.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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