The right stocks can make you rich and change your life.
The wrong stocks, though… They can do a whole lot more than just “underperform.” If only! They can eviscerate your wealth, bleeding out your hard-won profits.
They’re pure portfolio poison.
Surprisingly, not many investors want to talk about this. You certainly don’t hear about the danger in the mainstream media – until it’s too late.
That’s not to suggest they’re obscure companies – some of the “toxic stocks” I’m going to name for you are in fact regularly in the headlines for other reasons, often in glowing terms.
I’m going to run down the list and give you the chance to learn the names of three companies I think everyone should own instead.
But first, if you own any or all of these “toxic stocks,” sell them today…
Zillow Group (NASDAQ:Z, NASDAQ:ZG)
Zillow thrived during the residential real estate boom of the Covid-19 era, largely thanks to low interest rates. Now, there’s talk of the Federal Reserve possibly cutting rates after recent hikes, but this could reignite inflation issues we saw in 2022.
Here’s the downside: The strong job market, especially with the hotter-than-expected November employment data, poses a dilemma. If the Fed cuts rates, we might see home prices surge again, making affordability a significant issue. On the financial front, Zillow’s revenue, which hit $3.34 billion in 2020, has since seen a sharp decline.
But there’s another side to this. Despite analysts setting an average price target of $50.17, suggesting Zillow might be a stock to sell, the company’s shares have seen a notable rise in the past month.
For investors, this presents a bit of a conundrum. Zillow’s recent stock performance might seem tempting, but the broader economic and market trends suggest a cautious approach. If you’re holding Zillow shares, it might be wise to keep a close eye on these developments and consider your next move carefully.
SunPower (NASDAQ:SPWR)
SunPower recently sent shockwaves through the industry, with its shares tumbling 41% in just one day. This steep drop came after the solar company issued a concerning “going concern” warning, signaling potential bankruptcy fears. In a regulatory filing, SunPower revealed it had breached a credit agreement and might default on a significant debt payment. Adding to the unease, the company has postponed its third-quarter financial results, citing substantial doubts about its ability to continue operating.
Majority-owned by French energy conglomerate TotalEnergies SE (NYSE:TTE), SunPower, a key player in the rooftop solar industry, has faced tough times. The sector has been hit hard by a sales slowdown, largely due to high interest rates making solar panels less affordable for consumers. Additionally, the broader clean-energy stock market has suffered a downturn, worsened by rising interest rates. In 2023 alone, SPWR stock has seen a staggering 73% decline.
For investors, this paints a grim picture. With financial instability and market challenges, SunPower’s future looks uncertain. If you’re holding SPWR stock, it might be time to reassess and consider whether this fits into your investment strategy amidst such volatility.
Canopy Growth (NASDAQ:CGC)
A major cannabis industry player, Canopy Growth recently experienced a significant 14% drop in premarket trading. This sharp fall came on the heels of their announcement of a 1-for-10 share consolidation, a move aimed at maintaining Nasdaq compliance. This strategy, however, has only intensified investor worries about the company’s ongoing struggles.
The concerns don’t stop there. Canopy Growth’s third-quarter earnings report was less than stellar. The company posted a GAAP earnings per share of negative 21 cents, a clear sign of dwindling profitability. Its quarterly revenue also took a hit, dropping to $70 million, a concerning 20.4% decrease year-over-year. The company’s EBIT margin, now at a staggering negative 100% compared to the sector median of almost 1%, further highlights its difficulties in a highly competitive market. These factors position Canopy Growth as a stock to potentially sell as we approach 2024.
Adding to the list of challenges, Canopy Growth is seeking creditor protection for its BioSteel Sports Nutrition unit and is looking to sell it off. They’re also selling their headquarters back to Hershey Co. (NYSE:HSY). These moves, aimed at streamlining operations amid market volatility, raise serious questions about the company’s long-term viability. For investors, these developments might signal a need to reevaluate holding CGC in your portfolio.
