7 F-Rated Stocks to Avoid Now
The best investors know how to identify winners and fill their portfolios with stocks that have the best return potential. And at the same time, they know what actions to avoid. Identifying the red flags that make a once-promising name a likely loser is a skill every investor should cultivate.
This is why the portfolio binder exist. It’s a great tool that can help you identify stocks to buy now, as well as stocks to avoid now. By evaluating a stock based on its fundamentals and buying pressure – essentially the amount of money flowing into a stock and its momentum – the portfolio binder gives you an edge in stock valuation. Stocks that should be avoided at all costs get “F” grades.
The following choices may be household names, but they are definitely actions to avoid. If you have some in your wallet, it’s your wake-up call.
|PIECE OF MONEY||Coinbase Global||$87.91|
|SAY||The Walt Disney Company||$120.23|
Stocks to Avoid: Biogen (BIIB)
biotechnology company biogenic (NASDAQ:IBIB) recently released a fairly strong second-quarter earnings report, beating revenue and profit expectations. But investors took the opportunity to bail out BIIB shares after those July 20 earnings, sending the stock down about 6%.
The biggest problem is the lack of clarity around the company’s treatment for Alzheimer’s disease, Aduhelm. The drug has a list price of $28,200 per year and has been poorly received by the medical community. On top of that, federal regulators have refused to cover the drug for routine treatment under Medicaid. But Biogen didn’t address the issue in its second-quarter earnings report, leaving analysts unsettled.
Truist lowered his price target for BIIB shares from $320 to $270. Similarly, Needham lowered its target from $262 to $250.
BIIB stock is down 9% so far in 2022, but there is too much uncertainty here to consider buying lower.
Chimera Investment Corp. (CIM)
Based in New York, Chimera Investment Corp. (NYSE:CIM) is a real estate investment trust, or REIT, that focuses on residential mortgages, asset securitization and mortgage-backed securities. Essentially, it buys residential mortgages and securitizes them so it can create its own mortgage-backed securities.
Unfortunately for investors, rising interest rates and inflation are major headwinds for CIM stock. Chimera is down almost 38% since the start of the year.
Second-quarter earnings were red flags. The company missed both revenue and net income, posting revenue of $116.89 million. He saw earnings per share, or EPS, of 31 cents against expectations of 35 cents.
Until the housing market shows signs of improvement, CIM stock is best avoided.
Stocks to avoid: Coinbase Global (COIN)
If you want to watch a stock with all the negative momentum in the world, look no further than Coinbase Global (NASDAQ:PIECE OF MONEY). Down 65% so far in 2022, Coinbase is suffering from the general downturn in cryptocurrencies, known as “crypto winter.”
Coinbase, a cryptocurrency exchange that just started public trading in April 2021, said it lost $1.1 billion in the second quarter, temporarily dropping COIN stock by 13%. The profit included revenue of $808.3 million, which was lower than the $832.2 million expected by analysts. The loss of $4.98 per share in earnings was much worse than the $2.65 EPS loss the street had expected.
The Security and Exchange Commission (SEC) is also investigating Coinbase and its operations. This is yet another headwind for COIN stocks.
The Walt Disney Company (DIS)
Almost everyone has heard of it The Walt Disney Company (NYSE:SAY) and Disney stocks. The multi-faceted entertainment conglomerate has a market capitalization of over $210 billion and is best known for its namesake movie studios and amusement parks.
Disney has made huge changes in recent years to enter the streaming business as a true competitor to netflix (NASDAQ:NFLX). It added its Disney Plus streaming service and acquired the rights to Pixar and Marvel films, as well as the star wars franchise.
On the surface, you’d think things would be great. But DIS stock is down more than 22% so far this year, and the House of Mouse is in turmoil. The transition from former CEO Bob Iger to current CEO Bob Chapek has not been smooth.
Employees aren’t happy either, protesting what they saw as a lukewarm response to Florida laws that limit instruction on matters relating to sexuality and gender identity. Disney is also losing its special tax district, which will impact the company’s bottom line.
While Disney enjoyed a strong earnings report for its fiscal third quarter, there is too much going on that will drag DIS stock down in the near term.
Stocks to Avoid: Gap (GPS)
A brick and mortar retailer would have to be really special in this market for me to stand up and notice. But Difference (NYSE:GPS) does not correspond to this bill.
The company owns brands such as Gap, Old Navy, Banana Republic and Athleta. They did well in the past, but that doesn’t mean they should be expected to do well today.
Today’s retail market is light years different than it was just a few years ago. The Covid-19 pandemic has made online shopping much more popular. And as people return to stores, the pandemic has proven that consumers are just as willing to spend their money online as they are browsing the clothing section of a store.
On top of that, supply chain issues continue to plague retailers like Gap, and inflationary pressures mean customers no longer have the same disposable income as before.
In May, CEO Sonia Syngal abruptly quit her job after an unsuccessful run in which she largely failed to revitalize the company’s fashion footprint. GPS stock is down 42% so far this year.
I was not a big fan of i robot (NASDAQ:IRBT) stock before Amazon (NASDAQ:AMZN) announced a $1.7 billion deal to buy iRobot at $61 per share.
IRBT stock jumped 19% after the announcement and is now trading near $60. So if you didn’t own the iRobot share prior to Amazon’s announcement, you’ve missed an opportunity to make a quick profit on this deal.
Amazon is expected to offer iRobot’s Roomba smart sweepers and other household products on its massive e-commerce platform. And it will surely be able to integrate iRobot’s technology with Amazon’s artificial intelligence, Alexa, so owners can command it to schedule a Roomba cleaning.
Hopefully Amazon will have better luck with this latest addition. iRobot has missed revenue estimates for each of the past three quarters, posting $255.35 million in the latest quarter, while analysts expected $303.06 million.
From an investor’s perspective, no one should feel bad seeing the IRBT ticker being swept away with the garbage.
Stocks to Avoid: Penn Entertainment (PENN)
Not so long ago Penn Entertainment (NASDAQ:PENN) was much appreciated. The company has signed an agreement with Sport bar stool to partner with its Sportsbook platform in an effort to expand online gambling and sports betting outside of Nevada and New Jersey.
Those days seem very distant now. As states slowly roll out sports betting, investor sentiment for the online gambling market has faded. This is especially true for PENN shares, which are down 25% so far in 2022 and more than 60% since mid-March 2021.
Second quarter earnings were a huge disappointment. While the company managed to pull in revenue of $1.63 billion versus expectations of $1.6 billion, the company largely missed EPS estimates. It reported EPS of 15 cents against EPS expectations of 50 cents.
Analysts are disappointed with PENN shares. Stifel recently lowered its price target from $50 to $45, and Barclays lowered its target from $44 to $37.
At the date of publication, Louis Navellier owned DIS shares. He had (neither directly nor indirectly) any other position in the securities mentioned in this article. The InvestorPlace research staff member primarily responsible for this article has not held (directly or indirectly) any position in the securities mentioned in this article.