雅虎香港財經 The 7 Worst Stocks to Buy in a Bear Market
Investors need to steer clear of the worst stocks to buy in a bear market.
Financial markets have been in a bear market for more than six months with no sign of it ending soon. The recent data signals that we may be headed further into the depths before there is any respite from Wall Street. Hence, it’s likely to be a torrid time ahead for investors.
The Federal Reserve will continue raising interest rates aggressively to cool down the economy. This will be done despite the controversy among market participants, who feel it will lead to a financial crisis.
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The recently-released consumer price index is at a 40-year high and, given the labor market’s strength, the equity market will continue to buckle under pressure.
Wall Street seems to agree that we are heading for a recession, but no one can tell how bad it will get. Hence, it’s time to get serious about reducing your risk. Investors need to sell off investments in companies with poor outlooks and fundamentals, along with strong headwinds.
Annaly Capital Management | $17.27 | |
Tilray Brands | $3.39 | |
Redfin | $4.40 | |
Peloton | $7.70 | |
Zoom Video | $78.54 | |
Vroom | $1.00 | |
Coinbase | $68.12 |
Annaly Capital Management (NLY)
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Annaly Capital Management (NYSE:NLY) is a mortgage real estate investment trust that has been a popular income stock option over the years.
Over the past decade, it has been a poor investment, shedding more than 70% of its value. With the current mortgage rates rising amidst Fed tightening, NLY stock is in more for an even more challenging time ahead.
It recently undertook a reverse stock split to inflate its stock value, but the market didn’t take too kindly to the development. The stock down by double-digit margins since the split.
Inflation numbers for September were far from encouraging, too, which points to more rate hikes in the upcoming months. Therefore, things aren’t going to get any easier for NLY anytime soon.
Tilray Brands (TLRY)
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Tilray Brands (NASDAQ:TLRY) has been one of the more popular cannabis stocks. However, it hasn’t produced any results warranting praise from investors. In the past four quarters, it has beat revenue estimates just one time.
In its recently reported fiscal 2023 first quarter results, it missed analyst targets by $3.6 million, generating just $152 million. Its combination with Aphria hasn’t paid many dividends despite the Canadian market’s progress. Its results show that the company has failed to manage its business operations effectively.
Prime cannabis sales saw a revenue drop of $12 million year-over-year, with the only bright spot being its beverage alcohol business.
Furthermore, it has limited access to the U.S. market on legalization. Its only investment is in MedMen Enterprises, while its peers are far ahead in their positioning in the U.S. Therefore, TLRY is a stock to avoid.
Redfin (RDFN)
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Redfin (NASDAQ:RDFN) is another stock that has witnessed massive price erosion in the past 12 months. Its stock has lost a frightening 88% of its value year to date and continues to trade in the red amidst an unprecedented economic situation.
In a more conducive housing environment, Redfin’s revenues had been growing by triple-digit margins last year. However, it suffered a dramatic revenue growth slowdown in its second quarter. Gross margins are sliding for its real estate transactions and properties segments with net debt over $1 billion.
A key problem with Redfin is that it employs real-estate agents directly, making its cost structure more fixed than its peers. Moreover, the company’s supply of homebuyers is drying up with rising mortgage prices. Homebuyers are in a tough spot with the Fed vowing to raise rates at a frantic pace.
Peloton (PTON)
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Home-gym equipment provider Peloton (NASDAQ:PTON) was a pandemic darling, with its stock price appreciating from $20 in March 2020 to $168 in January last year.
It benefitted from the closure of gyms across the country, with people changing their lifestyles. Consequently, its sales grew by a whopping $850.9 million, representing 87.27% growth in fiscal 2020. The following year, it witnessed an even bigger surge in sales, adding an additional $2.2 billion to revenues.
However, the scenario has changed completely in the post-pandemic world. Its total revenues declined by $439.7 million, losing $2.8 billion.
The company simply cannot replace the opportunity to exercise outdoors, which is why its business will continue to roll downhill. With the bear market looking unstoppable, PTON stock is an investment you should avoid.
Zoom Video (ZM)
Source: Michael Vi / Shutterstock.com
Zoom Video (NASDAQ:ZM) is another pandemic hero that experienced massive growth in its user base due to the shift toward online communication.
However, with the lockdown restrictions removed, it’s been struggling to grow at the same pace it did during the pandemic. Its revenue growth of 8% during the second quarter pales compared to the numbers it generated over the past couple of years.
At the same time, operational income is dropping at an alarming pace for the firm as it struggles to navigate through the current market headwinds.
Zoom doesn’t have a moat or competitive advantage against other companies in its niche, complicating its long-term investment case. Multiple communication softwares have sprung up over the past couple of years, which continue to chomp away at Zoom’s market share. Despite its challenges, ZM stock still trades at more than 5 times forward sales.
Vroom (VRM)
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Vroom (NASDAQ:VRM) is an end-to-end eCommerce platform for selling used vehicles.
The company was well-suited for social distancing and generated massive sales during the pandemic. As with most pandemic stocks, though, its shares have taken a major haircut. Its stock has fallen over 90% from its peak with the normalization of the expansion of its sales.
The company has struggled to demonstrate profitability, with losses accelerating at an incredible pace of late. Its management has introduced turnaround plans to improve cash burn, margins, and operational expenses to improve profits.
It could generate EBITDA margins at around 5 to 10% if it can achieve all its targets. That seems unlikely in the current market situation, though.
Its profitability profile has been under the radar from the get-go, which calls into question the quality of its business model.
Coinbase (COIN)
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Coinbase (NASDAQ:COIN) is a leading crypto company that faces strong fundamental headwinds and a tough crypto market.
Its recent results have been remarkably negative, while short-term prospects aren’t any better. Though the long-term outlook for the crypto market is favorable, its lack of diversification makes it a highly risky bet. Coinbase’s share price is linked to crypto prices, which points to massive volatility over the long term.
Moreover, its business hasn’t been profitable and isn’t expected to be profitable for the next three years. Its valuation is speculative, while fundamental strength remains incredibly weak. Additionally, its stock isn’t particularly cheap either, making it one of the worst bets in the current bear market.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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