It’s never a dull moment in Donald Trump’s America. Just the election of the most contentious president in American history was sure to create a few “controversy stocks,” or companies suffering negative press for whatever reason. But 2018 is turning into quite a minefield, which I believe will ultimately transition to a contrarian playground.
Yes, several risks exist when buying into controversy stocks. Primarily, controversy stocks could continue to fall as, for instance, further allegations come to light. The markets are also likely to interpret any news items extremely pessimistically. Unfortunately, we’re not the arbiters of determining when enough is enough. They don’t call it catching falling knives without reason.
But in the midst of negative reports, many investors succumb to sensationalism. They may be reacting to the headlines, as opposed to the actual substance of the controversy.
Here are four controversy stocks to buy that will likely make an unexpected comeback!
Controversy Stocks to Buy: Facebook (FB)
When it comes to controversy stocks, nothing right now is as big or worrisome as Facebook, Inc. (NASDAQ:FB). Since the close of March 16th, FB stock is down almost 14%. Facebook users expressed outrage over their personal data being illicitly used for political purposes when Cambridge Analytica gained the private information of 50 million users. Cambridge Analytica is a political data firm hired by the Trump campaign.
For a sense of scale, the 2016 election came down to less than 80 thousand votes in key electoral states.
Since then, the outraged have cried out with the hashtag #DeleteFacebook. It’s not just everyday folks, either. Celebrities, even business leaders like Tesla Inc’s (NASDAQ:TSLA) Elon Musk – who’s dealing with his own controversy — have called for a Facebook boycott.
However, USA Today’s Jessica Guynn wrote that it’s “unlikely” that a significant number of the “never Facebook-ers” will make good on their threats. Why would they? Despite the immediate hit to FB stock, this is the only social media firm that has two billion active subscribers. Facebook has become integral in many people’s lives.
Controversy Stocks to Buy: Nvidia (NVDA)
As you all know by now, Tesla shares are getting smoked in the markets. Due to a fatal accident involving a Tesla Model X, both traders and shareholders have been running for the exits. This is coming against the backdrop of an Uber driverless vehicle hitting and killing a pedestrian. Amid these alarming headlines, Nvidia Corporation (NASDAQ:NVDA) backed out of autonomous car testing.
To be clear, NVDA’s sensory and self-driving systems were not in use during the fatal crash. Uber uses Nvidia’s standard GPU, but it does not use NVDA’s autonomous-driving systems. Both Nvidia and Uber have confirmed this.
Despite NVDA not being responsible for the fatality, Nvidia CEO Jensen Huang said that:
There’s no question that everyone in the industry should pause…As soon as the news became clear to us we stopped. And the reason is that it’s good engineering practice. Whether you are using the highest level of engineering quality systems or the highest level of care, it doesn’t matter. If there’s an incident that happens and there’s a new piece of information you can learn from, then you pause to learn from it.”
These are not the words of a company which will continue recklessly and cause it’s own downfall. Nvidia’s actions are the opposite of controversial. Right now, the entire autonomous driving industry is facing a reckoning, and Nvidia is not shying away from it.
Plus, NVDA has so many other lucrative businesses. Their graphics cards represent the industry standard, critical for two burgeoning sectors: video gaming and cryptocurrency mining. Additionally, the company has incredible projects in business and marketing analytics, as well as data center innovations.
Yes, NVDA stock will be volatile in the nearer-term, but don’t overlook its many positives.
Controversy Stocks to Buy: American Outdoor Brands (AOBC)
American Outdoor Brands Corp (NASDAQ:AOBC) was already permanently placed among controversy stocks before more than 1 million people marched for stricter gun control in over 800 protests on March 24.
Not too long ago, AOBC changed its name from Smith & Wesson Holding Corporation. The latter sounds incredibly aggressive, and it was the right move from a marketing perspective. Unfortunately, gun control activists see through the ruse. After the horrific Parkland shooting massacre — when the company’s AR-15 was used to kill 17 people — AOBC stock has never looked the same.
But that’s not the whole story. AOBC stock has been plummeting since the 2016 election. On November 8, 2016, American Outdoor shares closed at $28.45. It has never hit that price point since.
With Republicans controlling the government — limiting gun control fears — AOBC just can’t capitalize.
Still, you should consider putting AOBC in your stocks to buy list soon. Republicans may lose “bigly” in the upcoming midterm elections. That might send the right fear message to the markets, eventually boosting American Outdoor Brands.
Controversy Stocks to Buy: Lumber Liquidators (LL)
Last but definitely not least, we have Lumber Liquidators Holdings Inc (NYSE:LL). Lumber Liquidators is different from the other names mentioned because its controversy occurred in 2015. Due to a “60 Minutes” expose, the company was found to be using laminate flooring containing excessive amounts of formaldehyde.
Despite damage control efforts, LL stock incurred a horrifying plummet. Between February 24 and March 6, 2015, LL evaporated more than half its market value. The company would then continue to hemorrhage even more, in large part because the formaldehyde controversy was just one issue. Lumber Liquidators has also plead guilty to environmental crimes — including practices that could have led to the extinction of the Siberian Tiger.
LL stock was an investment that just couldn’t catch any breaks, and the underlining organization didn’t deserve any. Still, we are a nation of second chances. If rotten Equifax Inc. (NYSE:EFX) can compromise millions of Americans’ personal data and security, surely LL can redeem itself.
You don’t have to excuse Lumber Liquidators for their shoddy and dangerous business practices, but those days are gone. We have new leadership and a fresh approach to the business.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.