Seeking out great stocks to buy is essential, beyond a doubt, but many would say it’s more important to know what to avoid or get rid of, because a losing stock can cost you. That’s why to get the absolute best possible performance out of your portfolio, you’ve got to be prepared to trim back the deadwood.
Being on the wrong side of a moving stock can eat away at those all-important long-term returns, so it’s important to keep your eyes out for potential losing stocks along with the winners. Even the best gardens need pruning, and our team has spotted a couple of stocks that seem like prime candidates for selling or avoiding.
The pandemic has proven to be a blessing for e-commerce platforms across the board. One area that has done exceptionally well is the online used car market. While pandemic shutdowns eliminated many of its brick-and-mortar used car peers, Caravana (CVNA) thrived.
Since March 2020, CVNA share price has bolted upward 12x. So far in 2021, Carvana has shot up another 50%, approximately tripling the performance of the S&P 500.
Still, Carvana isn’t substantially profitable, and the company’s recent $750 million debt issuance highlights its cash-bleeding nature. Not to mention that the stock is downright expensive right now. CVNA’s current share price reflects a market cap of more than $60 billion. This puts Carvana at a higher value than Ford (F) on a market cap basis. If this year’s outperformance trend holds, it’s catching up to GM’s $74 billion market cap quickly.
When you consider the company’s enterprise value (that is, the company’s market capitalization plus all its net cash or debt position), Carvana is roughly 5x more expensive than its closest rival, Vroom (VRM), which is smaller and growing at a slower pace, but that valuation seems unrealistic.
While we do see a promising future for the industry, we’ll let Carvana cool off for a while before considering it in the buying range.
Gold is in a strange moment in its history, and it has everything to do with cryptos. Wall Street is providing as much exposure to cryptocurrency demand as investors can handle. Cryptos are now the preferred alternative investment over gold.
Gold has been trading in range for a while now and gold producers have gotten stuck as well. The pandemic has slowed operations and demand and now the delta wave threatens to further impede gold demand and production.
This could all change at some point, if the markets ever correct. But for now gold has taken the back burner and gold miners are not faring well.
Canada-based Alamos Gold Inc. (AGI) made it to our stocks to sell or avoid list because currently, it isn’t attracting buyers and gold prices aren’t going anywhere. AGI has lost nearly 13% in the past 3 month and 22% in the past year.
As the number 4 mobile carrier in the U.S. Cellular (USM) is not in the game of top tier service. While the three biggest carriers are spending billions on 5G upgrades, USM waits until they’re done and rents space on their systems, which puts them at the mercy of their larger counterparts when it comes to serving their customers.
Considering USM focuses on the more rural and ex-urban markets, it may be a while before USM customers can take advantage of 5G. The areas with sparse populations aren’t going to see 5G anytime soon because the large carriers won’t run 5G to rural areas until later in their buildouts.
USM is down 17% in the past 3 months and will remain on our sell list until 5G structure is more established and the company is able to provide the top-tier service that customers have grown accustomed to from the other providers.
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