The right stocks can make you rich and change your life.
The wrong stocks, though… They can do a whole lot more than “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…
Walt Disney Co. (DIS)
Barron’s recently published an article discussing Disney’s six major challenges, the most obvious being the company’s push into streaming with Disney+. As it stands now, management sees Dsiney+ making money in 2024, but the push to deliver a profitable streaming platform is up against its fair share of challenges. For one, the actors and writers strike means there won’t be a full slate of content. It’s not just content concerns haunting Disney: The company’s willingness to sell its linear TV assets, like ABC, begs the question of who would want to buy them.
Disney stock is trading within 3% of its 52-week low of $84.07. It’s down 18% over the past year and 24% over the past five years. By comparison, the S&P 500 is up 61% over the past five years.
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C3.ai Inc (AI)
C3.ai may have a catchy ticker symbol that aligns with the market’s enthusiasm for artificial intelligence. Still, there really isn’t much else to say about AI when it comes to considering it for our portfolios. AI is slow-moving, unprofitable, and lacks the potential to benefit from the current excitement surrounding consumer-facing AI. It isn’t certain that C3.ai will capitalize on the opportunity, making it a stock to avoid; it is largely inflated at this point, and, unfortunately, many of us were late to the rally.
AI’s stock is up year-to-date by an insane 285.52%, and the case for it being overvalued is easy to make when looking at the negative numbers. AI has a 2.61 beta and an ROE of -28.02% and shows $266 million in TTM revenue, from which it lost $268 million thanks to its crazy -100.77% profit margin. AI shows negative year-over-year growth in net income (-11.19%), net profit margin (-11.05%), and operating income (-29.65%). With a 10-day average trading volume of roughly 52 million shares, AI has a median price target of $23.50, with a high of $50 and a low of $14, suggesting the potential for a price decrease anywhere from -45% to -67%. AI has six buy ratings and four hold ratings.
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Adeia (ADEA)
Adeia is an intellectual property licensing firm with a relatively 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, its payout could be cut to ribbons. This may result in a steady decline for ADEA stock as well.
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