3D Systems Corporation (DDD), Sony Corporation (ADR) (SNE): 3 Stocks That Could Suffer a Speculative Sector Sell-Off

Much of the company’s earlier gains were driven by hedge fund activist Dan Loeb, who pushed to spin off Sony Corporation (ADR) (NYSE:SNE)’s entertainment division. Loeb thinks the division would be worth 9 times EBITDA on its own.

There are two major risks for Sony Corporation (ADR) (NYSE:SNE) shareholders. First, the company’s management rarely makes decisions quickly, especially when it’s mulling over spinning off a major part of its business. Second, Dan Loeb may give up his efforts to shake up the company. Due to the delay between stock sales and the requirement to report these transactions, investors will be last to know if he’s already reduced his exposure in the company.

At this time, there are few other catalysts that would justify a higher share price for Sony. Its new ultra-high-resolution 4K OLED television is not yet a mainstream product, and sales will not reach mass volume for at least another year. In the smartphone market, Sony is having success with its Android-based Xperia smartphone, but its rival Samsung enjoys the lion’s share of profits for Android phone sales.

Conclusion

Markets have lots of excess froth to unwind. After all, the S&P 500 SPDR ETF is up 13.2% in 2013, so even small corrections will not threaten its overall positive return. Yet investors need to remain vigilant with their speculative holdings.

Much of the gains in the sectors above came from the U.S. and Japan’s quantitative easing efforts. But despite the resulting steady stream of low interest rates and cheap borrowing, bond yields are rising. If investors start to doubt QE’s sustainability of QE, the stocks discussed above will sell off.

That decline would create a buying opportunity for fundamentally sound companies like First Solar and 3D Systems Corporation (NYSE:DDD). But Sony sorely needs restructuring, and if QE stops, so could the catalysts driving its rise.

Chris Lau has no position in any stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool owns shares of 3D Systems and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems.

The article 3 Stocks That Could Suffer a Speculative Sector Sell-Off originally appeared on Fool.com and is written by Chris Lau.

Chris is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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