The stock market is now highly volatile and investors still fear that the Federal Reserve rate hikes could result in a recession. However, even in the best-case scenario, some stocks remain overvalued. These overvalued stocks will likely face a sharp decline during a market crash.
Multiple stocks have already gone through a correction. However, there are still many that remain overvalued and fragile. As we’ve seen with stocks such as Netflix (NASDAQ:NFLX) and Facebook (NASDAQ:FB), a single disappointing earnings report can cause a selloff.
Therefore, I have identified the following three stocks to sell before the next market crash:
|MAR||Marriott International, Inc.||$172.17|
|COIN||Coinbase Global, Inc.||$73.59|
Stocks to Sell: MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) was a struggling company before taking a gamble on Bitcoin (BTC-USD) with loans. The company has kept on accumulating Bitcoin since and its chief executive officer regularly preaches about the pros of Bitcoin. Of course, that is expected since his company depends on it.
Although BTC can be highly profitable during a bull market, a recession or a bear market can wreck the asset. The recent market volatility has proven that crypto is far from recession-resistant, but rather increasingly correlated with the stock market.
Moreover, MicroStrategy has been taking out billions in loans with Bitcoin as collateral. As per its first-quarter (Q1) report, the company bought at an average of $30,700 per Bitcoin. The average price will likely be higher in Q2, as MicroStrategy purchased more BTC near $45,000.
Of course, Bitcoin can still go up in the long run. However, there will be ups and downs in the market and MicroStrategy is taking a significant risk by putting all its eggs in one basket. In the case of a recession, I believe it is highly unlikely that MicroStrategy will be able to do well with all of its liabilities.
Marriott International Inc (MAR)
Marriott International (NASDAQ:MAR) is the world’s biggest hotel chain. As evidenced by previous downturns, the leisure and hospitality industry is highly susceptible to a recession.
After the coronavirus recession, MAR stock recovered. However, the company still hasn’t managed to fully recover its profitability. Marriott’s quarterly net income has started to flatten out. Moreover, the company’s robust growth rate is likely to slow down in Q2 as Covid-19 recovery subsides.
In addition, Marriott’s price-to-earnings ratio is high at 38.26. Holding alternative growth stocks is far more likely to be profitable. Therefore, I believe it is a good time to sell MAR stock before the next market crash.
Stocks to Sell: Coinbase (COIN)
Coinbase (NASDAQ:COIN) is among the largest cryptocurrency exchanges. The company is struggling as the crypto market has lost a significant portion of its value and investors are moving away from the market.
Coinbase currently faces devastating losses. Its revenue declined by 35.28% year-over-year to $1.16 billion and has become unprofitable, with a net income decline of 242.32% to negative $429.66 million. Coinbase’s net profit margin has also declined 186.06% to negative 36.87%. The chance of recovery seems slim unless the crypto market goes on another bull run.
To put it simply, Coinbase is not a stock you’d want to hold; not now, and especially not in a market downturn.
On the date of publication, Omor Ibne Ehsan 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.