The right stocks can make you rich and change your life.
The wrong stocks, though… They can do a whole lot more than just “underperform.” If only! They can eviscerate your wealth, bleeding out your hard-won profits.
They’re pure portfolio poison.
Surprisingly, not many investors want to talk about this. You certainly don’t hear about the danger in the mainstream media – until it’s too late.
That’s not to suggest they’re obscure companies – some of the “toxic stocks” I’m going to name for you are in fact regularly in the headlines for other reasons, often in glowing terms.
I’m going to run down the list and give you the chance to learn the names of three companies I think everyone should own instead.
But first, if you own any or all of these “toxic stocks,” sell them today
Affirm Holdings Inc (AFRM)
Our first stock to avoid is Affirm Holdings, a fintech firm specializing in “buy now, pay later” services, and it faces significant hurdles. Despite an initial surge in growth facilitated by AFRM’s partnership with Peloton (PTON), there has been a struggle to sustain momentum. AFRM’s most recent quarter saw results that confirmed its lack of profitability. Also, being a consumer credit business, AFRM will likely experience mounting challenges amid a dim economic outlook.
AFRM’s stock is up year-to-date by 93.74%; you’ll notice a trend where, after seeing a YTD gain, you’ll see negative numbers from there on. For instance, AFRM has an ROE (return on equity) of -37.97% and a 3.65 beta, which indicates how prone the stock is to volatility. AFRM has a TTM revenue of $1.51 billion, yet it lost $965 million thanks to its -64.12% profit margin. AFRM shows negative year-over-year growth in net income (-276.21%), EPS (-263.16%), and net profit margin (-250.36%). With a 10-day average volume of roughly 24 million shares, AFRM has a median price target of $16, with a high of $20 and a low of $6; this suggests a potential -68% drop from its current price. AFRM has 10 hold ratings and 3 sell ratings.
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Walgreens Boots Alliance Inc (WBA)
Wallgreens this week cut its fiscal fourth-quarter earnings guidance and reported a weaker-than-expected fiscal third-quarter profit. Guidance for the company’s burgeoning Health segment which was expected to flip to profitability in the third quarter was slashed.
Walgreens now expects fiscal 2023 adjusted EBITDA between losses of $380 million and $340 million. The company’s previous guidance called for a profit at the top end of the range. Management also lowered preliminary 2024 guidance amid lingering “operational challenges.” The current consensus among 19 polled analysts is to Hold WBA stock.
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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 one 16.7% cut implemented in 2020.
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