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…
Electronic Arts (NASDAQ:EA) – Time to Hit the Pause Button
Electronic Arts, known for its blockbuster games and equally controversial monetization tactics, hasn’t been winning any high scores in the stock market game. Over the past five years, EA’s shares have only managed a modest 31% increase, with a disappointing 4% dip year-to-date.
Sporting a P/E ratio of 33 and a meager 0.59% dividend yield, EA’s approach to shareholder returns seems as conservative as its in-game economies. Despite the gaming industry’s potential for explosive growth, EA hasn’t raised its dividend in two years, a move that hardly inspires confidence.
The latest financials don’t offer much comfort either. With just a 3% year-over-year revenue increase in Q3 FY24, EA’s valuation is looking increasingly hard to justify. Although net income saw a 42% jump, such profit growth seems out of sync with its sluggish revenue uptick, signaling that this performance might not be sustainable.
For investors eyeing the gaming sector, it might be wise to look beyond Electronic Arts. The market is rich with other gaming companies that are not only innovating but also offering more attractive growth prospects. In short, it might be time to consider cashing out on EA and exploring more dynamic opportunities elsewhere in the gaming universe.
Xerox Holdings Corporation (NASDAQ:XRX) – Time to Let Go
Remember Xerox? The brand that became synonymous with photocopying? Well, times have changed, and so has Xerox. The company has branched out into managed services, IT, software, and automation. But don’t let the diversification fool you; Xerox is facing some tough challenges.
The company’s recent move to slash 15% of its workforce is a glaring red flag. It’s a sign that Xerox is scrambling to reorganize its core business and cut costs, hinting at deeper issues.
The financials paint a grim picture too. Xerox’s revenue dipped 9.1% year-over-year in the latest quarter, with a GAAP net loss of $58 million. Adjusted net income took a $90 million hit compared to last year, and adjusted operating margins shrank by 380 basis points. The company’s hopeful promise to achieve a “double-digit adjusted operating income margin by 2026” feels like a distant dream.
Analysts are giving Xerox a thumbs down, and it’s not hard to see why. With declining revenues, a challenging outlook, and a long wait for a potential turnaround, it might be wise to part ways with XRX sooner rather than later. In a market full of opportunities, holding onto Xerox could mean missing out on better investments.
Himax Technologies (NASDAQ:HIMX) – Falling Behind in the Semiconductor Race
In the bustling world of semiconductors, where generative AI is propelling many companies to new heights, Himax Technologies finds itself lagging. As a fabless semiconductor outfit, Himax specializes in display driver integrated circuits, crucial for the visual performance of TVs, tablets, and automotive displays. However, these products aren’t riding the same wave of demand benefiting AI-driven semiconductor tech.
The numbers tell a concerning story. Himax’s revenue for the fourth quarter dropped to $227.6 million from $262.2 million the previous year. Even more alarming, profits plummeted to $23.5 million, or 13 cents per share, a significant fall from $42.1 million and 24 cents per share year-over-year.
With HIMX stock down 11% in 2024, the writing’s on the wall. Despite the semiconductor sector’s overall bullish trend, Himax’s focus areas are not capturing the market’s current growth drivers. For investors holding HIMX, it might be time to reassess and consider reallocating to more promising opportunities within the tech sphere.
