Three Stocks to Avoid or Sell Next Week

Seeking out great stocks to buy is important, but identifying quality investments is only half the battle. Many would say it’s just as essential for investors to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. By taking a proactive approach to avoiding losing stocks, you can set yourself up for greater success in your investing journey.

Even the best gardens need pruning and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Read on to find out why we believe these particular stocks are poor investment choices and learn how to apply our analysis to your own portfolio management strategy…

Black Hills Corporation (BKH)

Natural gas producer Black Hills Corporation reset its growth outlook lower after reporting disappointing Q4 results, slashing its 2023 EPS view to $3.65-$3.85 from $4.00-$4.20. The revision was driven by a rapid shift in macroeconomic factors, including elevated natural gas price volatility and higher natural gas demand driven by winter storm Elliot in December 2022. With elevated natural gas price volatility, higher interest rates, and general inflationary pressures forecasted through 2024, Black Hills is only expected to grow earnings by 1% in 2023, 2% in 2024, and 4% in 2025.

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Summit Materials (SUM)

Summit Materials has struggled to show consistent growth since its 2015 initial public offering. Over the last eight years, the vast majority of the company’s growth has come from acquisitions, with only 2.9% of its growth coming from organic revenue expansion. Between 2015 and 2022, the company spent more than $1 billion buying other construction material companies, taking on debt to do so. This strategy has weighed on Summit Materials’ balance sheet and share price.

Unfortunately, construction materials isn’t a great business to be in, especially with your average U.S. mortgage rate now above 6% in a cooling market. Investors would be wise to steer clear of this homebuilder stock.

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Funko Inc. (FNKO) 

Last month, pop culture consumer products company Funko, Inc. announced a set of leadership changes, including a C-suite management shakeup, a COO role creation, and the introduction of an execution consultant following several missteps over the last two quarters. The changeover in management could take several quarters to reset and could present challenges in building investor confidence. FNKO shares currently trade at a premium to its historical averages and near the high end of its relative valuation range versus the S&P 500. The stock’s rich valuation seems unwarranted, considering the high degree of execution risk.

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