Three Stocks to Avoid Like the Plague

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…

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Lemonade (LMND)

Thus far, the self-proclaimed insurance industry disruptor has gained a healthy following. But in all of the enthusiasm surrounding its  AI-based underwriting technology, investors may be turning a blind eye to its laundry list of flaws.

In 2022 Lemonade generated a 116% increase in premiums. By contrast, the company expects just 12% year-over-year growth in 2023. Aside from the dramatic slow-down in overall business, the company is bleeding cash, posting an adjusted EBITDA loss of $225 million last year. This year’s EBITDA loss is expected to come in at around $242 million.

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JetBlue (JBLU)

With airline stocks currently trading at extremely low multiples, value seekers may be eyeing the group, wondering which ticker is the better buy. Some airlines will be more suitably positioned to withstand a slowing economy and possible recession, while JetBlue does not seem well-equipped for further negative impact. Anyone considering JBLU at less than eight times earnings would do better to consider a more stable name. 

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Fisker (FSR)

Fisker remains committed to following through with the delivery of 5,000 of its award-winning debut model, the Fisker Ocean, by September despite serious production headwinds. A primary supplier to Fisker, Magna International, has significant supply chain problems that will increase the cost of production. Obviously, the company can’t pass those costs on to customers who’ve already reserved their vehicles. Instead, the EV maker will have to eat those costs, which will cut into crucial revenue from its first real production run. At one point, Fisker looked like a potential leader in the EV race. Now it seems like another stock to get rid of while you can. 

FSR is one of the most heavily shorted stocks today. Short interest on the stock increased by 12% to 68 million shares from March 31 to April 14, FactSet data shows. That’s nearly 40% of Fisker’s free float of shares, or the stock available for trading.

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