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…
Gap Inc. (NYSE: GPS) Holiday Discounts Signal Potential Weakness
Gap Inc. saw its stock rise over 6% this week, bringing its year-to-date gain to more than 23%. However, recent Black Friday weekend data raises concerns about the retailer’s performance during this critical shopping season. Gap leaned harder on discounts across several of its brands, including Old Navy, Athleta, and Banana Republic, offering larger price cuts as the weekend progressed—an indication that sales may have underperformed initial expectations.
While aggressive discounting can drive short-term sales, it often signals weaker-than-expected demand and can pressure margins. Analysts remain cautious on Gap, with most holding a neutral stance and the average price target suggesting only modest upside of 8.5%.
Given these concerns and the uncertain outlook for the rest of the holiday season, Gap’s recent rally may not be sustainable. Investors might want to consider locking in gains and looking for opportunities with stronger fundamentals and more predictable growth.
C3.ai (NYSE: AI) Valuation Concerns Overshadow Growth Potential
C3.ai has enjoyed a strong run in 2024, with shares up 45% year-to-date. However, the stock’s valuation appears increasingly difficult to justify, raising concerns about its ability to sustain this momentum. Trading at levels that imply a significant premium over peers, C3.ai’s current price may already be pricing in a best-case growth scenario that is far from guaranteed.
While the company has shown improved revenue growth recently, much of that progress has come at high incremental costs, and its growth rate still lags behind competitors of much larger scale. JPMorgan recently downgraded the stock to underweight, maintaining a $28 price target—33% below its current trading price.
C3.ai’s exposure to the rapidly expanding AI market is promising, but its uneven growth and margin performance leave questions about its long-term potential. For investors, the risk of a pullback seems higher than the reward at these valuation levels. Taking profits or steering clear for now might be the prudent choice.
Walgreens Boots Alliance (NASDAQ: WBA) Too Many Risks, Too Few Catalysts
Walgreens Boots Alliance has had a brutal 2024, with its stock plunging 65%, making it the worst performer in the S&P 500 this year. The company is struggling on multiple fronts: it’s posted losses in three of the last four quarters, slashed its dividend earlier in the year, and faces intense competitive pressures from Amazon’s push into same-day prescription delivery.
Walgreens’ healthcare clinic strategy has also failed to deliver meaningful results, and there’s growing speculation it could be abandoned altogether. While new CEO Tim Wentworth may eventually outline a turnaround plan, there’s currently no clear path to profitability or long-term growth.
With too many risks and no near-term catalysts, Walgreens remains a stock to avoid. It’s tempting to view it as a contrarian opportunity, but until management can demonstrate a sustainable strategy, the outlook remains bleak.
