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…
Walgreens Boots Alliance (NASDAQ: WBA) Uncertainty Surrounds Acquisition Rumors and Struggling Fundamentals
Walgreens Boots Alliance stock has seen a recent surge, climbing over 21% last week on rumors of a potential private equity buyout by Sycamore Partners. Despite this newfound bullishness, the risks surrounding Walgreens make it a stock to avoid for now.
First, the rumored acquisition is far from guaranteed, and even if the deal goes through, the price Sycamore pays will dictate returns for investors. With Walgreens already rallying, the potential upside for new buyers may be limited. If the deal falls apart, the stock could tumble back to its previous lows, erasing any recent gains.
Second, Walgreens’ fundamentals remain weak. The company has posted losses in three of its last four quarters and faces growing competition from online prescription services and industry rivals. These headwinds make a turnaround uncertain, even with a potential buyout.
Investing in a stock purely on acquisition speculation is a high-risk move, especially when the underlying business is struggling. Walgreens may look attractive after its recent rally, but the risks outweigh the potential rewards. For now, it’s best to keep this stock on your watchlist and steer clear of adding it to your portfolio.
FuboTV (NYSE: FUBO) Mounting Challenges Undermine Growth Potential
FuboTV, a sports-focused streaming platform, continues to face significant challenges that make it a stock to avoid. While the company has managed to narrow its losses, reporting a Q3 net loss of $0.17 per share compared to $0.29 a year ago, its overall fundamentals remain weak.
Revenue growth is slowing, increasing just 20.3% year-over-year in Q3—a sharp drop from its growth rate in 2023. Subscriber growth has also faltered, reflecting an inability to maintain momentum. Meanwhile, FuboTV remains unprofitable and heavily reliant on maintaining its niche position in a highly competitive streaming market.
The company faces increasing pressure from both new and established competitors. Netflix’s entry into sports streaming with live events like boxing and plans for pro football games could pose a significant threat if expanded. Additionally, FuboTV is embroiled in a legal battle to block the launch of Venu, a potential competitor backed by Disney, Fox, and Warner Bros Discovery.
Even if FuboTV wins the legal fight, the fact that its profitability depends on staving off competitors highlights the fragility of its business model. For investors, this is a clear signal to stay away. With slowing growth, rising competition, and uncertain profitability, FuboTV is too risky to hold in your portfolio right now.
Chegg (NYSE: CHGG) Struggling to Stay Relevant in the AI Era
Chegg, once a go-to online learning platform for students, is facing severe headwinds as generative AI technologies like ChatGPT reshape the educational landscape. With tools that can solve problems, write essays, and even pass professional exams, AI has made Chegg’s subscription model increasingly obsolete.
The company’s financial performance reflects this disruption. In Q3 2024, revenue declined 13% year-over-year to $136.6 million, and subscribers dropped 13% to 3.8 million. Chegg also reported a net loss of $2.05 per share, a dramatic decline from the $0.16 loss a year ago.
While Chegg has introduced AI-supported services in an attempt to stay relevant, these initiatives have yet to demonstrate meaningful traction. Competing directly with free or low-cost AI tools is a monumental challenge, and the company’s dwindling subscriber base underscores its struggle to adapt.
With revenue and subscriber losses piling up, and no clear path to recovery, Chegg is a risky bet. Until the company proves its AI-driven strategy can deliver results, investors would be wise to steer clear. For now, Chegg belongs on your sell or avoid list.
