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 (NASDAQ: SMCI) Uncertainty Looms Despite Potential Recovery
Super Micro Computer has experienced both highs and lows in 2024. The company started the year with impressive triple-digit revenue growth driven by demand from AI customers and achieved milestones like joining the S&P 500 and Nasdaq 100. However, the stock has since dropped 70% from its peak in March, and recent developments suggest continued uncertainty.
The delayed filing of financial reports, compounded by the resignation of its auditor and a short report from Hindenburg Research, has shaken investor confidence. Although Supermicro has taken steps to regain Nasdaq compliance, including hiring a new auditor and pledging to file reports by February 25, the lack of finalized financials remains a significant red flag.
Adding to the pressure, Supermicro will be removed from the Nasdaq 100 on December 23 as part of the index’s rebalancing. This could lead to additional short-term selling pressure from funds that track the index.
While the company’s forward P/E ratio of 11 suggests potential value, it’s crucial to have clarity on its financial health before investing. Until audited reports are released and the company fully addresses these concerns, the risks outweigh the potential reward.
Supermicro may become a recovery story in 2025, but for now, it’s better suited for your watchlist than your portfolio.
Lucid Motors (NASDAQ: LCID) A Risky Bet in a Competitive EV Market
Lucid Motors continues to draw comparisons to Tesla, but the gap between the two companies remains vast. While Lucid has made strides in producing and delivering vehicles—reporting a 90% year-over-year improvement in Q3 deliveries—it still lags far behind Tesla’s scale. To put it in perspective, Tesla delivered 462,890 vehicles in the same period, compared to Lucid’s 2,781.
This stark disparity underscores Lucid’s uphill battle to compete in an increasingly crowded EV market. While Tesla faced little competition during its early days, Lucid must contend with both established automakers and new entrants vying for market share. Building its business requires massive capital investments, and Lucid is still deep in the red. The company reported a Q3 2024 loss of $0.41 per share, widening from a $0.28 loss a year ago.
Management has emphasized its liquidity of $5.16 billion, but this cash reserve is not infinite. The company faces significant pressure to scale production and move toward profitability before those funds run dry. With stiff competition and a challenging road ahead, Lucid remains a speculative bet rather than a stable investment.
Unless you’re prepared to take on high levels of risk in the hopes of a long-term turnaround, Lucid Motors is a stock to avoid for now. Watch the story unfold from the sidelines rather than betting on a recovery that’s far from guaranteed.
Wolfspeed (NYSE: WOLF) High Risk with Too Many Uncertainties
Wolfspeed has had a rough year, with its stock plummeting more than 80% in 2024. While the company’s focus on silicon carbide technology aligns with growing demand in electric vehicles and renewable energy, the road to profitability looks long and uncertain.
The challenges are significant. Wolfspeed is hemorrhaging cash, with a net loss of $282.2 million in its most recent quarter and total liabilities of $7.2 billion—nearly matching its total assets. The company’s costly transition to 200mm silicon carbide wafer production has further strained its balance sheet, while EV demand is softening, leading to declining revenue.
Management upheaval, including the departure of its CEO in November, adds another layer of risk, along with the possibility of losing $750 million in CHIPS Act funding if certain milestones are not met. Cost-cutting measures, like a 20% workforce reduction and halting factory construction, are in place but won’t bear fruit until at least 2026.
While Wolfspeed is a leader in silicon carbide technology, its precarious financial position and industry headwinds make the stock a highly speculative bet. Until the company shows tangible progress in stabilizing its business and achieving profitability, it’s best to avoid this high-risk stock.
