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…
NewtekOne (NASDAQ:NEWT)
NewtekOne, a player in the financial services sector catering to small and medium-sized businesses, is showing signs of strain. Since its start in 2013, NewtekOne’s path has been rocky, and recent developments aren’t painting a brighter picture.
The company’s latest earnings report is a bit of a letdown. They’ve cut their full-year 2023 EPS guidance to just $1.60 to $1.80, missing earlier projections and analyst expectations. Looking ahead to 2024, the forecast doesn’t seem to promise much improvement, lagging behind market predictions.
While there was a slight uptick in EPS and net interest income in the third quarter, these gains are overshadowed by a drop in total assets – down from $1.44 billion to $1.38 billion. The stock’s trajectory reflects this downturn, with a 16% fall year-to-date and a steep 37% decline over the past five years. It’s clear NewtekOne is facing tough challenges and struggling to win back investor trust. If you’re holding onto this stock, it might be time to reassess.
Endava (NYSE:DAVA)
Endava is a global IT services provider specializing in digital transformation, agile development, cloud migration, and automation solutions. This tech services company has been a frequent feature on my sell lists this year, and it’s time to flag it again due to its persistent underperformance.
Endava has seen some benefits from the trend of companies outsourcing tech and business services. However, the company is hitting a wall when it comes to attracting new clients and upselling to the existing ones. This has led to a stagnation in their top-line growth of quarterly revenue throughout 2023.
Looking ahead to 2024, while the global economy might dodge a full-blown recession, we’re still expecting an economic slowdown. This environment could continue to weigh down DAVA’s share price in both the short and medium term. If you’re holding Endava, it might be wise to reconsider your position.
Agree Realty (NYSE:ADC)
Agree Realty is a retail REIT based in Michigan with a portfolio of over 2,000 properties, including fast-food restaurants, grocery stores, pharmacies, used car lots, and automotive parts retailers.
While Agree Realty boasts a monthly dividend and a 5% yield, there’s cause for concern. The stock has dipped 17% this year, a trend influenced by the retail sector’s challenges with rising interest rates and a consumer shift towards online shopping. These factors make Agree Realty a less attractive option in the retail REIT space.
Financially, there’s a mixed bag. Third-quarter revenue climbed to $136.7 million, up from $110 million the previous year. However, the increase in revenue is overshadowed by a significant rise in operating expenses. Real estate taxes jumped from $8.52 million to $10.12 million, and total operating expenses soared from $55.6 million to $73.7 million. This surge in costs has led to a drop in earnings per share, from 47 cents a year ago to 41 cents in the third quarter of 2023.
Given these factors, it might be wise to steer clear of Agree Realty for now, especially if you’re cautious about the retail space in the current economic climate.
