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…
Rigetti Computing (RGTI): Overvalued and Burning Cash
Rigetti Computing (RGTI) has seen its stock price plunge 50% from recent highs, but this isn’t necessarily a dip worth buying. While quantum computing remains an exciting frontier, Rigetti’s financials and valuation suggest it’s a stock to avoid.
Rigetti generated less than $12 million in revenue over the past year, while burning $60 million in cash—a significant mismatch that raises questions about the company’s long-term viability. Even after its steep drop, Rigetti’s market capitalization sits at $2.8 billion, translating to an eye-watering price-to-sales (P/S) ratio of 234. This lofty valuation is hard to justify, especially given the lack of consistent demand for its services and the broader industry consensus that quantum computing is still decades away from widespread utility.
CEO Jensen Huang of Nvidia recently highlighted quantum computing’s potential but tempered expectations by stating the technology won’t be broadly useful for at least two decades. This reality has likely fueled recent sell-offs in Rigetti and other quantum computing stocks as investors recalibrate their timelines and expectations.
Rigetti’s balance sheet also presents a major concern. With just $20 million in cash on hand and a high cash burn rate, the company faces liquidity challenges in the near term. Without significant improvements in revenue generation or access to additional funding, its ability to survive long enough to capitalize on quantum computing’s potential remains in doubt.
While the promise of quantum computing is undeniable, Rigetti’s current financial and operational metrics make it a high-risk investment. For now, this is a stock best avoided.
Workiva (WK): Regulatory Uncertainty Raises Concerns
Workiva (WK) saw its stock drop significantly lat week, sparked by reports of potential changes to the European Union’s (EU) sustainability reporting standards. This development has rattled investors, as Workiva’s platform for tracking and submitting non-financial metrics under the EU’s Corporate Sustainability Reporting Directive (CSRD) has been a key driver of its growth strategy.
The CSRD, which went into effect in January 2023, has created a significant market for Workiva’s services. However, if the EU moves to ease reporting requirements, Workiva could face a considerable shortfall in anticipated sales. While the extent of potential policy changes remains unclear, reports of regulatory easing in the EU have led to concerns that one of Workiva’s primary growth drivers could weaken.
The company is set to release its fourth-quarter earnings on February 25, which may shed more light on its exposure to possible regulatory shifts. Until there’s more clarity, the uncertainty surrounding Workiva’s growth prospects, coupled with its sharp stock price decline, makes this a risky hold for investors.
For those concerned about portfolio stability, Workiva’s dependence on evolving government policies could create continued volatility. It’s a stock worth avoiding for now.
Trump Media (DJT): Lofty Valuation with Uncertain Fundamentals
Trump Media (DJT) saw its stock tumble 18.3% last week, underperforming broader market gains of 1.7% for the S&P 500 and 1.6% for the Nasdaq. This sharp pullback highlights the risks associated with a business heavily reliant on momentum rather than fundamentals.
The sell-off came after President Trump’s inauguration, which initially sparked investor enthusiasm for the stock. However, the anticipated rally failed to materialize, leading to a “buy the rumor, sell the news” dynamic. Adding to the bearish sentiment, the launch of the Official Trump cryptocurrency raised concerns about the company’s focus and direction. While the coin may have generated some excitement, it also drew criticism, potentially reflecting poorly on Trump Media’s broader brand and strategy.
Trump Media’s core business struggles to justify its $7.1 billion market cap, especially with reported revenue of only $1.61 million over its first three quarters as a public company. The Truth Social platform has shown weak user engagement and monetization, and the company’s foray into streaming remains unproven as a meaningful revenue driver.
With limited clarity on how Trump Media plans to scale its business and generate sustainable growth, the stock appears to be trading more on speculation than substance. Its current valuation far outpaces its fundamentals, and without a clear path to profitability, Trump Media is likely to continue behaving like a meme stock—highly volatile and unpredictable.
For investors seeking stability and growth backed by strong business fundamentals, Trump Media is a stock to avoid.
