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…
Micron Technology Inc. (NASDAQ: MU) – Reevaluate Amid Stagnant Projections
Micron Technology recently delivered its quarterly earnings, and despite not missing the mark by Wall Street’s standards, the report hardly inspired confidence, pushing its stock down by over 5%. While the company has seen a commendable year-to-date surge of over 60%, fueled by high expectations from AI-driven growth, its latest forward-looking statements have cooled off some of that investor enthusiasm.
For the upcoming quarter, Micron forecasts earnings per share (EPS) of $1.08 on projected revenues of $7.6 billion, aligning almost exactly with analyst predictions. This guidance reflects stability but fails to excite the market, particularly following such a significant run-up in its share price based on its advanced memory contributions to the AI sector.
A critical concern for Micron lies within its core sectors outside of AI. The company’s smartphone and personal computer (PC) divisions are facing significant headwinds due to weak global demand, effectively dampening the more positive results from its AI technology applications. This imbalance suggests potential vulnerabilities in Micron’s broader market performance, casting doubts on sustained growth if AI-related gains are not enough to counteract the sluggishness in other key areas.
Given these factors, investors might consider reducing their exposure to Micron, especially those who are looking to lock in gains from its recent spike. The company’s near-term outlook indicates that now could be a prudent time to reassess its position in your portfolio, particularly before any further market adjustments to its valuation.
Etsy Inc. (NASDAQ: ETSY) – Challenges Mount Amid Economic Headwinds
Etsy, renowned for its unique two-sided marketplace that connects artisans with consumers, is currently facing significant challenges that are impacting its financial performance. Amid tighter budget constraints, Etsy has ramped up its spending on advertising and promotions in an attempt to capture consumers who are increasingly cautious about their spending. Despite these efforts, Etsy is struggling to keep pace with larger retailers.
The company’s recent first-quarter earnings for fiscal year 2024 have raised concerns, as they fell short of Wall Street expectations. Etsy’s Gross Merchandise Sales (GMS), which measure the total value of items sold across its platform, reported at $3 billion, missing the anticipated $3.12 billion target set by analysts. Additionally, both revenue and earnings for the quarter were slightly below expectations, underscoring the platform’s difficulties in navigating the current retail environment.
With shares down by 29.6% year-to-date, the outlook remains bleak. The ongoing economic pressures are likely to pose further challenges for Etsy, potentially stifling the platform’s ability to rebound and grow earnings in the near term. Given these factors, investors may want to consider reducing their holdings in Etsy as the company contends with an increasingly competitive retail landscape and subdued consumer spending.
Home Depot Inc. (NYSE: HD) – Facing Market Headwinds
Home Depot, a major player in the home improvement retail sector, is encountering significant challenges that could impact its stock performance. With the U.S. housing market experiencing a downturn amid high prices and rising interest rates, the demand for home improvement products is weakening. In May, existing home sales fell 0.7% from April and were down 2.8% year-over-year, which is particularly concerning for Home Depot as new homeowners are typically key customers for the chain.
The company’s first-quarter financial results reflect these market challenges. Home Depot reported a 2.4% decline in sales and a 3.2% drop in comparable U.S. sales compared to the same quarter last year. More notably, net income fell from $3.9 billion a year ago to $3.6 billion this quarter. This downturn is partly attributed to a decrease in spending on larger discretionary projects, as noted by CEO Ted Decker.
Adding to the bearish outlook, Saudi Arabia’s sovereign wealth fund has completely divested its holdings in Home Depot, signaling a lack of confidence in the stock’s near-term prospects.
Given these factors, investors might consider reassessing their position in Home Depot. The current trends in the housing market and internal company metrics suggest potential further struggles for the retailer, making it a candidate for those looking to trim exposure to vulnerable stocks in their portfolio.
