Danger Zone: 3 Risky Stocks to Dump Now Before Losses Mount
Stock investing is a game of knowing when to buy winners and when to sell losers. In theory it’s easy, in practice it is often much more difficult. Knowing when to dump risky stocks to sell is not easy. Markets are fickle and much of what makes a given stock rise or fall is subjective in nature.
At the same time, there are stocks that are generally perceived to be bad investments by the majority of market participants. In such cases it is much easier to get on board and sell. Let’s take a look at three companies and discuss why their stocks are not worth owning.
Boeing (BA)
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Boeing (NYSE:BA) is not only a risky stock but is also a dangerous company. If you’ve been following the latest scandal in an ongoing saga you’ll know that the company is under a lot of scrutiny for the handling of its most recent issue.
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The company suffered another setback on Jan. 5 after a door ripped off one of its 737 MAX airplanes operated by Alaska Airlines (NYSE:ALK). The issue was bad enough given that Boeing is trying to bounce back from a series of 737 Max crashes in recent years. However, the scandal is apparently getting worse. It has come to light that Boeing has not been cooperative with the National Transportation Safety Board’s investigation.
The NTSB sought the names of 25 employees who work on door plugs as part of its investigation. But, 2 months after the incident the department had yet to receive those names. It was only after the NTSB publicly complained that Boeing complied. It is a brief insight into Boeing’s operations but one that should also serve to illuminate the inherent risk by investing in its stock. It is one to avoid.
ContextLogic (WISH)
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ContextLogic (NASDAQ:WISH) continues to try to find a way to create value for investors. However, it simply doesn’t work and the result is that its stock is absolutely one to dump. That isn’t necessarily news to investors who have long been skeptical of the company and its shares.
On March 4th the company announced its latest earnings report. it was, as many expected, not strong. Revenues declined by 57% to $53 million. The resultant net loss was $68 million. The lone bright spot was arguably that losses narrowed from $110 million to $68 million during the period.
I remain confused as to the value of ContextLogic after disposing of its e-commerce platform. The transaction preserved the company’s $2.7 billion in operating losses. It did not dispose of them.
Peloton (PTON)
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Peloton (NASDAQ:PTON) is the kind of company that knows how to take advantage of an opportunity, but ultimately sells something that can’t persist. The stock was one of the biggest pandemic plays and exploded as people were stuck inside but sought to exercise. The company sold subscriptions and expensive exercise equipment. Predictably, with the end of the pandemic, its short rocket upward crashed back to earth.
The basic problem is that Peloton doesn’t have a way to create profits. The company seems to be constantly looking for the next revenue opportunity and marketing that as its savior. These days that manifests as a bike rental service that the company expects will grow at 90%. That’s fine but will it serve to staunch the bleeding in the company? The answer is no.
Peloton burns through several hundred million dollars of cash every quarter that it operates. That simple truth will continue to lead it to need to raise more cash through financing, or through an issuance of additional shares. Either outcome is bad for the company and will serve to push share prices lower. As a result investors should avoid Peloton.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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