Though the rally in the stock market has been impressive since March 23rd, this week stocks plunged as a result of profit-taking due to a potential second wave of the coronavirus spreading across many states.

The onset of the “new economy” combined with general market-wide uncertainty led to the downgrade of several stocks in our exclusive POWR Ratings system. The POWR Ratings are updated on a daily basis, providing valuable insight into emerging winners and losers.

Revlon (REV), Interface (TILE), Wells Fargo (WFC) and Welltower (WELL) were recently downgraded to either “sell” or “strong sell.”

Revlon (REV Rated “F” – Strong Sell)

People are no longer as self-conscious about their personal appearance now that the vast majority of time is spent in the house. Though the economy is reopening, plenty of people will continue to work and learn from home. As a result, fewer cosmetics, fragrances, hair color, deodorants and skincare products will be purchased.

REV manufactures and sells each of the products listed above. Ranked 58 of 65 stocks in the Fashion & Luxury segment, REV has a one-year price return of -56.14%, a six-month price return of -52.95% and a three-month price return of -10.71%.

REV is quickly approaching its 52-week low of $8.68. REV’s products simply no longer have the same appeal as they did in years past.

Interface (TILE Rated “F” – Strong Sell)

When times get tough, the last thing people are looking to upgrade is their business or home carpet. The chances of people spending money on designer carpet are even slimmer. TILE provides such carpeting, performing installation, replacement and maintenance.

Though TILE deserves credit for its commitment to environmental sustainability, this is a bad time to be selling carpet. TILE is rated last of five stocks in the Industrial – Textiles space with an F Trade Grade and an F Buy & Hold Grade.

TILE has a -11% three-month price return and a -49% six-month price return. The consensus estimate for TILE’s current year earnings estimate has been reduced by 15%. Investors have absolutely no reason to invest in TILE. If anything, a TILE short/put might prove prudent.

Wells Fargo (WFC Rated “D” – Sell)

Millions of loan defaults are coming through the pipeline. Banks are hesitant to lend money to businesses as well as individuals looking to purchase homes and other big-ticket items. This reduction in activity combined with pending loan defaults will undoubtedly hurt the likes of WFC.

As a result, WFC is now rated a “sell.” In fact, the POWR Ratings have WFC ranked last of all the stocks in the Money Center Banks category.

WFC has a -41% five-year price return, a -34% one-year price return and a -7.75% price return across the past three months. Tough times are ahead for WFC even if there is a V-shaped recovery. Furthermore, this banking giant is in the midst of rebuilding its reputation after a number of self-inflicted banking scandals including the creation of fake accounts on behalf of customers in an attempt to profit from unnecessary fees.

WFC added more than $3 billion to its loan loss reserves in the first quarter alone. Steer clear of this stock for the foreseeable future.

Welltower (WELL Rated “D” – Sell)

Though the large baby boomer age cohort is moving through its golden years, this is not an opportune time to invest in nursing facilities. WELL is a real estate investment trust (REIT) that provides senior housing/healthcare real estate ranging from nursing facilities to medical office buildings and independent living centers.

Due to the coronavirus outbreak, WELL is simply trying to survive, rather than make a bundle of money. Even if there is not a second wave of the virus, it will be a while before WELL and other senior living centers can welcome visitors in confidence.

Furthermore, admitting new residents also poses a risk as such individuals might transmit the virus. It merely takes one resident or employee to transmit the virus to the majority of a WELL nursing facility’s elderly residents, ultimately putting the entire client base in jeopardy. Avoid WELL until the coronavirus is long gone.

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REV shares were trading at $10.32 per share on Friday afternoon, up $0.49 (+4.98%). Year-to-date, REV has declined -51.82%, versus a -4.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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