Bad Stocks To Buy [UPDATED]
The coronavirus outbreak is making a number of stocks look like bad bets for new money at current levels. Of even more concern are those big, brand-name stocks Wall Street wasn't completely sold on even before COVID-19 hit the scene.
bad stocks to buy
We limited ourselves to average scores of 2.9 and above. Additionally, since Sell calls are so rare, we searched for names with at least two of them. Lastly, we only looked at stocks with at least 15 "darn-with-faint-praise" Hold recommendations.
All this makes KHC one of the worst stocks to buy right now, which is saying something, given that it's in the currently treasured consumer staples sector. Two analysts call it a Strong Buy, 15 say Hold, two say Sell and two rate KHC at Strong Sell.
The analyst community broadly sees Walgreens as one of the worst stocks to buy right now. One brave analyst calls WBA a Buy. The other recommendations break down as follows: 19 Holds, two Sells, two Strong Sells.
Talk about a role reversal. Seeing such a rally in beat-up stocks is yet another sign, along with surging meme stocks and a banner year for ARK Innovation (ARKK), that speculation is back in the market.
All 10 of the worst stocks in the S&P 500 last year are up this year. All 10 are beating the S&P 500. And what's more, they're up an average of 13.0%. That not only tops the S&P 500's 3.5% gain this year, but it blows away the average 5.7% gain of last year's best 10 S&P 500 stocks.
The same worst-to-first phenomenon is happening with smaller stocks, too. The 10 worst stocks in the S&P 1500 last year, which includes small companies, is up an average of 15.9% this year. Last year's top 10 S&P 1500 stocks, on the other hand, are only up 2.3%.
Skilled growth investors know that most big runs happen with stocks showing strength. Additionally, investors trying to "buy the dip" got burned several times in 2022. All the attempted rallies of 2022 ultimately failed, leaving speculators with even larger losses.
Even the savviest and most knowledgeable investors need to be wary when it comes to picking stocks in a bear market. Markets still remain sluggish, and all indications also point to a sub-par showing this year.
Traders often compare a stock to its sector and see how it's doing compared to other stocks. Case in point: the P/E ratio. If your stock has the highest P/E, it might deserve a deeper look. For example, a stock that has a P/E of 15 or higher or a dividend lower than 2.5% might present reasons for skepticism.
One example of investors investing emotionally was during the "dot-com" boom, when many investors threw caution to the wind and leaped into internet stocks without really figuring out how or whether these companies could ever generate cash flow or profit. In some cases, investors loved the product they were using and may have decided the rest would naturally follow. Turns out that's a common fallacy.
The energy sector was one of the worst performing parts of the overall stock market for most of the 2010s. In fact, there were multiple years when major equity indices like the S&P 500 closed in the green despite its energy sector falling multiple percentage points in the same time period. However, the contrarian play of buying beat-up energy stocks would have served you well since pandemic lows as the market has bounced all the way back and is now the best performing stock sector of the market.
The underperformance of tech stocks and cryptocurrencies has combined for an even worse performance of crypto stocks. Since the start of 2022, Small Technology (STIX) futures are down -25%, Bitcoin (BTC) is down -35%, and Small Cryptocurrency (SCCX) futures - tracking Bitcoin, Ether, and more than a dozen single stocks in the crypto sector - are down -50%.
Digging deeper into the Small Cryptocurrency Index, you can find even worse performers in MARA, COIN, and NCTY. That said, risk can be much greater in buying single stocks as opposed to diversified index-oriented products.
Trading volume can also spike around the release of news, as investors scramble to buy and sell as they digest the new information. And other stocks tend to have high trading volumes because they're in the news or of special interest to investors.
Bonds are generally considered a less-risky asset than stocks. Still, they haven't been immune to the selloff investors experienced this year that has sent all three major stock market indexes tumbling into bear markets. The Federal Reserve has been raising interest rates to battle high inflation and most recently hiked rates by three-quarters of a percentage point for the third time in a row. The Bloomberg Global Aggregate Index of government and corporate bonds is down more than 20% since the beginning of the year, signaling the global bond market has entered a bear market for the first time in around three decades.
And actually moderating how much risk you take is much easier in bonds than in stocks: If you want to have a low-volatility bond portfolio, you buy bonds with shorter durations and higher credit quality, Plecha explains. (Credit quality refers to how likely a borrower is to repay their debt. Shorter-term bonds are less volatile because you're not locking up your money as long.)
Typically when you're young, financial advisors tend to say you shouldn't have a lot of money invested in fixed income. Instead, you may want to establish an emergency fund first, and then invest money you won't need in the near future in stocks. But as you get closer to retirement, you likely want to invest in bonds because they allow you to preserve capital and have more predictability.
There are many different ways to buy bonds, and the process is sometimes (but not always) as easy as buying stocks or ETFs. You can head to TreasuryDirect.gov to buy bonds directly from the federal government. Money has a whole guide to buying I bonds this way.
Some of the worst stocks to own in a U.S. economy trying to claw back from the COVID-19 pandemic are those with high exposure to tight labor markets, which runs the risk of pressuring profit margins as wages are hiked.
"Labor market tightness will remain a challenge during the next few years. Investors should avoid stocks with high labor costs relative to EBIT [earnings before interest and taxes]," says David Kostin, Goldman Sachs chief U.S. equity strategist, in a new research note to clients.
Explains Kostin, "While virus counts are now rising and weighing on reopening stocks, as the winter wave passes, declining virus and inflation headwinds should provide a near-term boost to corporate revenues and margins for the businesses most exposed to these challenges."
Undoubtedly, recession-induced sales pressure and ongoing inflation headwinds will be tough for the disruptive innovator to steer clear of. Further, higher interest rates do not bode well for high-growth stocks with uncomfortable multiples. At 82x trailing earnings, Amazon stock is a tough place to be in the face of eroding earnings and sales.
The three stocks were designed to move independently of each other, and in each trial of the experiment the students were shown a price update about how they rose or fell. A few seconds later they were given a chance to trade their stock for a different one or hold on to it. Camerer and colleagues looked at how the brain reacted to news about earnings, and how brain activity reflected the basis for making decisions.
In another, more complex experiment, Camerer explored bubble-related behavior, or irrational exuberance, in which stocks become overvalued. This time he allowed the test market prices to emerge from collective activity by the participants themselves. Afterwards, he separated participants into categories of high, medium and low earners based on their stock gains, and correlated the findings to brain activity.
Cueball and Ponytail are discussing the stock market. Ponytail explains that there has been no reliable way to consistently pick stocks that outperform the market average. She also states that there could be a corollary to that; there is no way to consistently pick bad stocks (presumably for this discussion, bad stocks refers to stocks whose value is expected to go down). Cueball states that he could consistently pick bad stocks, and the last panel shows him at a trading terminal purportedly buying bad stocks, while White Hat and Megan use his bad stock picks as indications that those stocks should be removed from whatever stock index they manage.
Generally, people invest in the stock market hoping to make money. They buy stock in companies whose value they expect will increase, and sell stock when they feel its value is about to stop increasing or start decreasing. Someone who could tell whether a stock's price will rise or fall (more than the average stock) in a given time interval could make a lot of money, but this is an infamously difficult problem. Market prices already reflect the consensus estimate of what a stock should be worth based on all public information about the company. Some investors use fundamental analysis, that is, they attempt to understand companies based on their financial statements and market position to identify which stocks are likely to become more or less valuable over time, while others use technical analysis which seeks to identify patterns in the stock prices themselves. Technical analysis was featured in comic 2101. However, while the rise and fall of stock prices are sometimes connected to real events (strong or weak profit statements, new product announcements, major scandals) that one person might predict better than another, they more often exhibit random-walk behavior. Many studies, such as the long-running "Investment Dartboard Contest" run by The Wall Street Journal, have found that an index of stocks that represent the total market, or even a set of randomly-selected stocks (often colloquially stated as "picked by a monkey") beats paying an expert to choose your portfolio. 041b061a72