Three Stocks to Avoid Now

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 avoid 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…

Bank of Hawaii (BOH)

With the failure of three regional banks (Silicon Valley Bank, Signature Bank, and First Republic Bank) in the past two months it seems wise to avoid struggling regional players like Bank of Hawaii.  Policymakers made one thing very clear back in March: Uncle Sam will protect depositors, not shareholders.  But the ugly truth is that there must be a limit to this protection.  If more banks continue to fail, it could outstretch the government’s capacity to maintain this commitment.  With such a steep risk involved, avoiding BOH seems like a no-brainer. 

BOH gained nearly 9% last week.  In the trailing one-month period, the stock tumbled nearly 23%. And since the start of this year, it printed a loss of 50% of equity value. The 6 pros covering the stock give it a Hold rating with none rating it a Buy.  

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Abrdn Income Credit Strategies Fund (ACP)

Closed-end fund, Abrdn Income Credit Strategies Fund offers a high forward dividend yield of 14.35%.  However, Over the past year, ACP shares have fallen by more than 20%.  Further declines may be ahead for two reasons.

First, higher interest rates have had an inverse effect on the value of ACP’s portfolio of low-rated debt securities.  Second, the current economic downturn could increase the default risk of ACP’s holdings. This may also result in another dividend cut, like the 16.7% cut implemented in 2020. 

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Adeia (ADEA)

Adeia is an intellectual property licensing firm with a fairly low forward dividend yield of 1.89%.  Taking into account downside risk,  questionable whether the company can maintain its current rate of payout.  Sell-side analysts anticipate ADEA’s earnings will fall by nearly 30% this year.  If management’s plan to maximize its portfolio fails, not only could its payout get cut to ribbons. This may result in a steady decline for ADEA stock as well.

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