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…
Super Micro Computer (SMCI)
AI’s reach extends far beyond tech, promising to boost the global GDP by a whopping $15.7 trillion by 2030, according to PwC analysts. Yet, not everyone’s buying into the AI frenzy. Some Wall Street skeptics have cast a shadow over the future of a few AI darlings, One stands out as a stock to sell or avoid.
Super Micro Computer. Following a jaw-dropping 751% rise over the past year and a 160% spike since the dawn of 2024, analysts are waving the red flag. Mehdi Hosseini from Susquehanna says SMCI could be looking at a 66% drop from its recent high.
Why the skepticism? Super Micro’s been on fire, thanks to its energy-efficient servers that are a big deal for AI data centers, not to mention its tight partnership with Nvidia. But here’s the kicker: despite forecasting a sunny fiscal 2024, history teaches us to temper our enthusiasm. Remember the cloud computing hype? Super Micro was supposed to be at the forefront, yet it didn’t quite hit the mark expected by many.
With shares sky-high and the company’s past performance in mind, it might be wise to tread carefully. Super Micro’s current valuation could be riding the AI hype wave a bit too hard. For those of you holding SMCI, it might be time to consider locking in those gains before the market does a reality check.
Lucid Group (LCID)
Lucid Group, the EV maker out of California, has been trying to carve out its niche in the electric vehicle revolution since 2007. With an assembly plant in Arizona, it’s had its sights set on becoming a major player. Recently, the stock perked up a bit, gaining 14% over the last month. However, it’s still a shadow of its former self, especially compared to its 2021 peak when shares soared above $55.
But here’s the rub: Lucid’s latest numbers aren’t painting a pretty picture. The company’s vehicle deliveries in the last quarter of the year dipped to 1,734, marking a 10% fall from the year before. Even more concerning, production saw a 32% drop, with only 2,391 vehicles built.
Revenue for Q3 tells a similar story, sliding down to $137.8 million from $195.4 million the previous year. Meanwhile, losses widened significantly, from $530.1 million a year ago to $630.8 million in the third quarter of 2023.
With demand waning, losses mounting, and the specter of shareholder dilution looming, Lucid’s current trajectory leaves much to be desired. For those holding LCID, it might be time to reassess and consider whether this stock fits into your long-term investment strategy.
Academy Sports and Outdoors (ASO)
Academy Sports and Outdoors has been under the microscope lately, and not for reasons that would excite most investors. Despite the buzz around ASO in 2023, its performance and outlook for 2024 have raised some eyebrows.
Let’s cut to the chase: ASO didn’t hit its mark in the latest quarterly earnings, posting an EPS of $1.38 against the expected $1.58. Revenue also fell short at $1.40 billion, missing the forecasted $1.44 billion and showing a 6.4% dip year-over-year.
But here’s where it gets even stickier – ASO’s financials are looking a bit shaky. With $274.83 million in cash versus a hefty $1.80 billion in debt, we’re looking at a negative cash position of -$20.56 per share. That’s a red flag waving high for financial risk.
The quick ratio isn’t doing them any favors either, sitting at a mere 0.25. This means ASO only has 25 cents in liquid assets for every dollar of current liabilities. Not exactly comforting.
And if you’re hoping for some saving grace in their free cash flow, don’t hold your breath. It’s been on a downward trend, plummeting from $970 million in 2020 to $443 million in 2022.All things considered, ASO’s current state makes it a prime candidate for our list of stocks to sell or avoid. For those holding ASO, it might be time to reassess and consider whether this small-cap stock aligns with your investment goals.
