June 14, 2025
Every successful investor knows a painful truth: knowing when to sell is often more critical than knowing what to buy.
While financial media overwhelmingly focuses on buying opportunities, our research consistently identifies companies facing significant headwinds that merit serious consideration for selling. These aren’t just stocks underperforming the market; they’re businesses confronting structural challenges, deteriorating fundamentals, or carrying valuations disconnected from financial reality.
What you won’t find here: reactionary calls based on short-term price movements or headline volatility. Each company on this list has been thoroughly analyzed across multiple metrics that historically precede substantial declines.
Smart investors understand that portfolio management requires both addition and subtraction. Sometimes the best investment decision is to redeploy capital away from troubling positions before problems fully materialize in the share price.
This week’s watchlist highlights stocks showing critical weaknesses that demand immediate attention:
Sherwin-Williams (SHW)
Sherwin-Williams faces mounting headwinds as Citigroup’s downgrade from buy to neutral triggered a 5.68% decline, reflecting growing analyst skepticism about the paint manufacturer’s prospects amid persistently high interest rates. Analyst Pat Cunningham’s warning about “suppressed” housing dynamics appears increasingly prescient, particularly after J.P. Morgan’s chief economist predicted the next Federal Reserve meeting will vote “unanimously” to leave rates unchanged. This interest rate environment creates a prolonged headwind for residential housing markets, which remain central to Sherwin-Williams’ growth strategy.
The company’s valuation appears increasingly difficult to justify given these challenging market conditions. Trading at 34 times earnings with a projected growth rate of only 10% and offering a meager 0.90% dividend yield, Sherwin-Williams provides minimal compensation for the substantial risks facing the housing sector. At $335.96, down from its 52-week high of $400.42, the stock has already surrendered significant value, yet the $84 billion market capitalization still appears excessive for a company whose primary market faces sustained pressure from elevated borrowing costs.
Citigroup’s preference for RPM International over Sherwin-Williams highlights the latter’s vulnerability. Despite RPM’s slower 8% growth rate, it offers double the dividend yield at 1.8% and trades at a more reasonable 23 times earnings compared to Sherwin-Williams’ 34x multiple. The elevated trading volume of 2.8 million shares versus the 1.7 million average suggests institutional investors are taking the downgrade seriously. With housing market recovery prospects dim and the Federal Reserve showing no inclination to lower rates, Sherwin-Williams appears positioned for continued pressure. For investors seeking exposure to construction-related companies, the analyst community’s shift toward less housing-dependent alternatives suggests it may be time to consider reallocating capital away from Sherwin-Williams before further deterioration in housing fundamentals materializes.
J.M. Smucker (SJM)
J.M. Smucker’s 13% weekly decline reflects the market’s growing recognition that the company’s 2023 acquisition of Hostess Brands represents one of the worst strategic decisions in recent corporate history. The food and beverage conglomerate’s fiscal fourth-quarter results were dismal across multiple metrics, with sales and adjusted earnings per share falling 3% and 13% respectively. Most damaging was another $980 million impairment charge on the Hostess acquisition, bringing total write-downs to an staggering $2 billion – effectively admitting the company overpaid by 36% for the Twinkie maker just two years ago.
The fundamental challenge facing Smucker extends beyond the Hostess debacle to a broader growth crisis that threatens its investment appeal. While the company boasts an impressive portfolio of recognizable brands including Folgers, Jif, Uncrustables, and now Twinkies, this market penetration (reaching roughly 90% of U.S. households) has become a ceiling rather than a foundation for growth. Annual sales growth has decelerated dramatically from 4% over the past decade to just 1% since 2020, with the latest quarter showing negative growth that suggests conditions are worsening rather than stabilizing.
Perhaps most concerning is the company’s deteriorated balance sheet, which now carries $7.3 billion in debt against a market capitalization of just $10.2 billion. This leverage effectively constrains management’s strategic options, forcing a focus on debt reduction rather than growth investments. While the 4.51% dividend yield appears attractive and uses only 56% of free cash flow, the combination of declining fundamentals and excessive debt creates a concerning trajectory. At $95.74, approaching its 52-week low of $93.93, SJM appears to be a value trap where dividend sustainability may come under pressure if operating performance continues deteriorating. For income-focused investors, the risk of future dividend cuts may outweigh the current yield attraction, making this an opportune time to consider alternatives before further fundamental deterioration potentially materializes.
Summit Therapeutics (SMMT)
Summit Therapeutics’ 11% Wednesday decline following Leerink Partners’ bearish initiation with an underperform rating and $12 price target (nearly 40% below current levels) highlights the speculative nature of biotech investments tied to single-drug success stories. Analyst Daina Graybosch’s skepticism about ivonescimab – the cancer drug licensed from China-based Akeso that represents Summit’s primary value proposition – raises fundamental questions about whether the company’s $15 billion market capitalization can be justified based on realistic market penetration expectations.
The core challenge facing Summit is that despite ivonescimab’s positive results in head-to-head clinical studies against Merck’s Keytruda, the drug faces significant hurdles as a follower rather than a first-mover in its therapeutic category. Graybosch’s analysis suggests that being second or third to market in cancer therapeutics creates higher barriers to clinical success, regulatory approval, and ultimately market share capture. This dynamic is particularly problematic for a company whose entire valuation rests on a single licensed asset rather than a diversified pipeline of proprietary compounds.
The stock’s extreme volatility – trading between a 52-week low of $6.78 and high of $36.91 – reflects the binary nature of biotech investing where single trial results can create or destroy billions in market value overnight. At $19.78 with zero gross margin and no revenue diversification, Summit represents a pure speculation on ivonescimab’s commercial potential. The elevated average trading volume of 4.7 million shares suggests ongoing institutional repositioning as investors reassess risk-reward profiles. For investors holding positions, the analyst’s realistic assessment of competitive dynamics and approval hurdles presents a sobering reminder that even promising clinical data doesn’t guarantee commercial success. With the stock trading at speculative multiples based on optimistic scenarios, prudent risk management suggests considering position reductions before additional clinical or regulatory developments potentially disappoint inflated expectations.
Bottom Line
This week’s featured companies demonstrate how different types of fundamental challenges can converge to create compelling sell signals. Sherwin-Williams faces persistent macroeconomic headwinds with no clear resolution timeline, J.M. Smucker confronts the consequences of poor capital allocation decisions while struggling with organic growth, and Summit Therapeutics trades on speculative hopes that may not materialize in competitive therapeutic markets. In each case, current valuations appear to inadequately reflect the magnitude of challenges ahead, whether from external market conditions, internal execution failures, or competitive positioning. For prudent investors, these situations highlight the importance of regularly reassessing holdings when fundamental assumptions change or when valuations become disconnected from realistic business prospects.
