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 a 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…
American Eagle (AEO)
American Eagle was once the epitome of must-have style for the younger generation. However, since the tumultuous era of the Great Recession, AEO’s performance has been marked by pronounced ups and downs. In essence, if you eliminate the market’s peaks and troughs, what remains is a relatively flat trendline.
By closely monitoring insider transactions, you get a sense of what a company’s future might hold, as they can be indicative of insiders’ confidence in their own organization, reflected particularly through their stock purchases. However, in the case of American Eagle, this confidence seems conspicuously lacking. Data from Fintel reveals a stark contrast: Insider purchases have amounted to a mere 28 transactions, with the most recent buy recorded in late July of the preceding year. Conversely, a staggering 150 insider sales transactions have been executed, the most recent being in April of the current year. These statistics underscore a lack of faith among insiders, painting an uncertain picture of the company’s prospects.
Further complicating the matter, market analysts have assigned AEO a consensus “hold” rating. However, with a price target of $14.50, investors may potentially grapple with substantial losses. Consequently, it might be prudent to consider an exit strategy while viable options remain available.
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Kraft Heinz (KHC)
Kraft Heinz, known for its household brands like Kraft Dinner, Heinz Ketchup, and Jell-O, has been grappling with persistent challenges ever since its formation through a merger in 2015. Adding to the reasons why KHC might warrant consideration in your list of stocks to get rid of is its staggering five-year decline of 42%, including a substantial 17% dip in the year 2023. Even the prominent investor Warren Buffett, who holds KHC shares, has publicly expressed regret over his investment in the company. The latest setback for Kraft Heinz was the resignation of its CEO, Miguel Patricio, after a four-year tenure. Patricio, who joined the company in 2019 with the mission to rejuvenate its sales and market share, now plans to step down in early 2024. His successor, Carlos Abrams-Rivera, currently presides over Kraft Heinz’s North American operations. This leadership transition coincides with a waning demand for Kraft Heinz’s products, driven by rising prices that are steering consumers toward more affordable generic alternatives.
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Canadian Pacific Kansas City (CP)
The Canadian Pacific Kansas City railway, a product of a recent merger, is navigating through its initial phases of integration. Notably, this railway holds a unique distinction, spanning across all of North America boasting tracks that traverse Canada, the United States, and Mexico. However, the company operates under some stringent conditions imposed by regulators who greenlit the $31 billion merger, which was formally completed in April of the current year. These conditions encompass a distinctive seven-year period of oversight, during which the company is prohibited from workforce layoffs.
Additionally, Canadian Pacific Kansas City has raised concern about the potential adverse effects of the recent labor strike at British Columbia seaports, indicating an anticipated impact on its third-quarter performance. The strike by dockworkers has been estimated to result in a daily revenue loss of around $80 million for the company. In terms of financial performance, the railway posted promising results for the second quarter, marking its inaugural earnings report since the merger. Notably, net income witnessed a robust 74% surge, while revenues climbed by an impressive 44% compared to the prior year. Despite these encouraging signs, investors seem to be adopting a cautious stance, with CP stock reflecting only a marginal gain of 0.15% over the past 12 months.
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