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…
Chewy (CHWY)
The e-commerce company focused on pet food and products, thrived during the Covid-19 pandemic as pet ownership surged. However, its recent performance tells a different story.
The company’s second-quarter earnings showed a decline, with net income falling to $18.9 million from $22.3 million a year earlier, and a 20% drop in earnings per share to 4 cents.
This downturn has caught analysts’ attention. Barclays’ Trevor Young reduced his CHWY stock price target from $28 to $20, while Goldman Sachs’ Eric Sheridan lowered his from $50 to $45.
Currently, CHWY stock is down by 43% this year, but don’t be fooled – this dip is not worth buying.
Upstart Holdings (UPST)
The fintech innovator with an AI-powered lending platform, is wrestling with formidable external factors. Despite an impressive 86% year-to-date gain, Upstart’s year-over-year revenue growth has plummeted by 48%.
A critical concern is the staggering $1 trillion credit card debt burdening Americans, a record high. While this might indicate confidence in the U.S. economy, it poses risks if economic conditions waver. Additionally, warnings from major retailers about growing consumer pressures add to the uncertainty.
This environment casts doubt on Upstart’s future. TipRanks analysts have shifted towards a Moderate Sell rating for UPST. For investors prioritizing stability, the volatile path of Upstart may warrant a reassessment of their investment in the stock.
TOP Financial Group (TOP)
Specializing in futures brokerage and other financial services, TOP appears overvalued considering its business operations and market performance. Since its market introduction in June 2022, TOP’s performance has largely been disappointing, with only a brief surge in value between late April and early May this year.
The company’s prospects seem precarious. Futures trading, its primary business, is a niche and challenging market requiring significant time and resources, which many lack. Additionally, TOP’s stock is both volatile and overpriced. Despite underwhelming performance, its shares are trading at a high 46.5x trailing earnings, surpassing 85.6% of its competitors. Furthermore, the market values TOP at 4.53x its book value, significantly higher than the sector median of 1.11x. These factors make TOP a risky and potentially overvalued investment option.
