In the wake of Monday’s widespread sell-off, it would be easy to have missed the fact that some stocks have fallen steadily all year and endured much steeper losses.
Many of the biggest losers in 2021 have been stocks that enjoyed big runs last year. Companies that flourished during Covid-19 lockdowns, enjoyed strong online sales, or were part of red-hot sectors such as electric vehicles have come back down to earth as investors have changed their focus and moved money into new areas.
Keeping up with shifting stocks and markets has been difficult, but there are some names that investors should avoid at all costs right now as they are likely to continue falling over the short and medium-term.
I’ve done a deep dive and found seven stocks to avoid… unless, of course, you like losing your hard-earned money.
- Peloton (NASDAQ:PTON)
- Walmart (NYSE:WMT)
- Tesla (NASDAQ:TSLA)
- Alibaba (NYSE:BABA)
- The New York Times Company (NYSE:NYT)
- StoneCo (NASDAQ:STNE)
- Nio (NYSE:NIO)
Stocks to Avoid Unless You Like Losing Money: Peloton (PTON)
To look at the share price of fitness equipment retailer Peloton, you’d think that the home exercise revolution ushered in by the COVID-19 pandemic is coming to an end. PTON stock is down 20% year to date at $118 a share.
The share price peaked in early January at an all-time high of $171.09, and it’s been all down hill since then. Not only has the stock dropped on expectations that people will return to gyms and fitness centers to exercise, it has also been hurt by a massive recall of its treadmills after children were harmed by the devices.
The economic reopening and global recall have been a devastating one-two punch for PTON stock, and the share price may not have bottomed yet. As more U.S. states reopen and a growing number of people return to gyms, analysts have been taking out their red pens and downgrading the company’s stock.
Investment bank Wedbush has become the latest Wall Street firm to downgrade Peloton’s stock from “outperform” to a “neutral” rating, as sales of the company’s popular stationary bike begin to slow. Wedbush lowered its price target on the stock to $115 from $130 previously.
The world’s biggest retailer has been a disappointment for shareholders so far in 2021, Walmart stock is down 4% at just over $140 a share. The stock had been as low as $126.28 in March before it recovered from that 52-week low. However, since April, WMT stock has been trading sideways and seem to be stuck in neutral.
The reason appears to be concerns over declining online sales as the pandemic retreats, increasing competition from rival online retailer Amazon (NASDAQ:AMZN), and a shift in investor sentiment towards other retail stocks.
While Walmart’s e-commerce business is today about twice the size it was a year ago, there is anticipation of an inevitable slowdown now as people ease up on their online shopping and return to shopping malls. The company says it is now focusing on building out its fulfillment centers with new technologies in an effort to automate processes, find efficiencies and improve productivity.
Whether that will be enough to spark a rally in WMT stock remains a question mark. For now, the share price continues to underperform and lag the broader indexes.
The bloom is definitely off the rose when it comes to EV maker Tesla. One of the best growth stocks of 2020, TSLA shares are down 13% so far in 2021 and are now 28% below their 52-week high of $900.40. Currently changing hands at $646 a share, it’s not clear how much further Tesla stock will slide before finding a bottom and reversing higher. In the five trading days between July 13 and 19, the company’s share price fell 7%.
TSLA stock has been hurt this year by a combination of problems ranging from a big recall and political issues in China to rising competition from traditional automakers such as General Motors (NYSE:GM) and Ford (NYSE:F).
The stock also continues to draw negative media attention for numerous vehicle safety issues and the short positions that prominent investors hold against it, essentially betting that the best is behind Tesla and the stock is destined to continue declining as electric vehicles become the standard all over the world in the coming decade.
Now is not the time to invest in any Chinese companies, especially the nation’s technology giants. As the government in Beijing continues to crackdown on the country’s leading technology firms, stocks of once high flying concerns such as Alibaba have suffered. While many people on Wall Street view Alibaba as a best of breed Chinese technology company, BABA stock is down 11% year-to-date and is currently struggling to stay above $200 a share.
Alibaba was slapped with a record antitrust fine of $3.6 billion by the Chinese government this past spring and continues to be under intense scrutiny from domestic regulators. Company founder Jack Ma is laying low as the future of Alibaba remains uncertain under an increasingly authoritarian regime in Beijing. This is an unfortunate development for a company that is a global leader in everything from e-commerce and artificial intelligence to cloud computing and electronic payments.
New York Times Company (NYT)
Warren Buffett, who once owned a sizable stake in The Washington Post, famously declared that “newspapers are toast.” However, the flagship of The New York Times Company has been bucking the downward trend in print media.
The newspaper publisher’s digital strategy has been heralded as a success and model for other dailies to follow. The Times has also become a leader in news podcasts, video content and virtual reality. The company’s earnings have held up remarkably well compared to the rest of the industry.
Yet despite its success, NYT stock continues to be a laggard, down 13% through nearly seven months of 2021. At its current price of $42.62 a share, the stock is 28% below its 52-week high of $58.73. Over the past 12 months, the share price has declined 6%.
The persistent slump comes despite the company having strong fundamentals and retaining 75% of its profits to reinvest in the business. Most analysts chalk the poor stock performance up to the fact that The Times continues to operate in an industry that is on a downslope, to paraphrase Mr. Buffett.
Some fintech companies are holding up well this year. Not StoneCo. The Brazilian financial technology company has seen its stock struggle mightily in recent months, down 33% year-to-date at $55.23 a share. STNE stock hasn’t been the same since it peaked at just over $95 a share in mid-February. Since June 1, the company’s share price has declined 20%. The steep drop has been due to the company’s missing analysts expectations in two consecutive earnings reports. Analysts expected first-quarter earnings per share (EPS) of 18 cents, and StoneCo came in with EPS of 11 cents.
The difficulty in rolling out vaccines and the ongoing closures of businesses is harming StoneCo’s business and its share price. It specializes in online point of sale transactions, digital banking and credit card processing, has seen its business hurt by prolonged shutdowns in Brazil and throughout the rest of South America. Only 16% of Brazil’s 211 million people have, to date, been fully vaccinated, according to the World Health Organization. That compares to nearly half (48%) of the U.S. population that is now fully vaccinated.
Another Chinese stock to avoid is electric vehicle maker Nio. Like Tesla, Nio has been hurt by a general shift in sentiment away from stocks of electric vehicle start-ups. And, like Alibaba, Nio has also been harmed by the ongoing government crackdown on publicly traded companies in China.
This double whammy has conspired to send NIO stock down 19% year-to-date to $43.45 a share. The slide in Nio’s share price is particularly painful coming as it does after the company enjoyed a monster rally of more than 2,500% in 2020.
Between March of last year and this January, NIO stock rose from $2.40 to an all-time high of $66.99 per share. The pullback may seem inevitable to some traders, but many analysts see it as the beginning of a potentially big correction for Nio, which continues to struggle against numerous headwinds in the form of rising competition, a global semiconductor shortage, and its first expansion outside of China.
For the time being, it looks like Nio’s share price will continue to struggle. It has slumped 7% in the past month.
On the date of publication, Joel Baglole held long positions in BABA and NYT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.