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…
Sunrun (NASDAQ:RUN)
Once a high-flying stock, RUN has hit a rough patch, especially in 2023, as the solar sector faced a significant correction. With dwindling subsidies and government scrutiny on solar rooftop installers, the company’s outlook is looking less sunny.
Here’s the harsh reality: Sunrun is grappling with massive operating losses and a precarious balance sheet. The company has lost over $1 billion in the past 12 months and is shelling out more than $500 million annually in interest payments. Given its hefty debt, simply cutting costs won’t be enough to steer back to profitability.
Despite a recent rally, likely fueled by a short squeeze, this uptick might not last. My advice? If you’re holding RUN stock, consider cashing out before potential further declines in 2024. The current market conditions and the company’s financial health suggest a bumpy road ahead.
Virgin Galactic (NYSE:SPCE)
On the surface Virgin Galactic is a captivating stock, linked to the exciting space tourism industry. Back in early 2021, SPCE really took off, fueled by speculative interest. But since then, the stock has come back down to Earth, dropping nearly 30% since the start of the year.
Here’s the situation: While Virgin Galactic does have some revenue, it’s not enough to shake off concerns about its credibility. The company’s sales have only marginally increased from $2.31 million in 2022 to $4.86 million on a trailing twelve months (TTM) basis. This growth is underwhelming, especially given the hype surrounding the stock. Plus, back in 2021, it only managed $3.29 million in sales, so we’re not seeing significant progress.
The downside is pretty stark. Despite its lackluster top-line performance, SPCE is trading at a sky-high trailing-year sales multiple of 169.6x. Analysts are leaning towards a moderate sell, with an average price target of $2.08, suggesting a further 15% downside.
Now, there’s been a recent uptick – SPCE is up over 15% in the past month, showing that the bulls are still in the game. But given the stock’s overall trajectory and financials, it might be wise to consider stepping back from SPCE, especially if you’re wary of high-risk plays.
Penn Entertainment (NASDAQ:PENN)
A major player in the legalized gambling scene Penn boasts over 40 casinos and racetracks across North America, along with more than 50,000 gaming machines.
Penn’s journey hit a major snag with its Barstool Sports partnership. Initially acquiring a 36% stake in 2020 and then going all-in by 2023 with a total spend of $550 million, the venture didn’t pan out. The costly mismatch led to Penn selling Barstool back to its founder, Dave Portnoy, for just $1.
Financially, the strain is evident. Third-quarter revenues slightly fell to $1.61 million from $1.62 million the previous year, and the company reported a substantial net loss of $725.1 million. This loss was anticipated, given Penn’s forecast of a pre-tax non-cash loss between $800 million and $850 million for the quarter, largely due to the Barstool exit.
With PENN stock down 19% over the past year, the company’s current trajectory raises concerns. If you’re invested in PENN, it may be prudent to reevaluate this position in light of these developments.
