Not all stocks are created equal, some have promise and some are just sorry stocks that you need to dump.
While many securities have enjoyed spectacular runs this year and seen their share price more than double, others have struggled and fallen steeply – underperforming the S&P 500 index’s year-to-date gain of 25% by a big margin.
As we come to the end of 2021, it is a good time for investors to review their portfolio with an eye to culling the underperforming stocks and reallocating capital to winning securities.
While not always easy to accept a loss and let go, there are some stocks that are so beaten down and the outlook for them so grim that it is best to sell and move on.
Here is a list of three especially sorry stocks that shareholders should dump before year-end.
Sorry Stocks That You Should Dump: Nautilus (NLS)
Fitness equipment manufacturer Nautilus has had a brutal year. The company behind well-known brands such as Bowflex and Schwinn Fitness has see its stock plummet 55% year-to-date.
That includes losing around 25% since the start of November after it delivered quarterly earnings that missed targets across the board.
In the past 52-weeks, NLS stock has gone from a high of $31.38 per share down 73% to its current price of just $8.30. At this rate, Nautilus will be trading as a penny stock by Christmas.
While the handful of analysts who cover Nautilus continue to scream that the stock is undervalued, it shows no signs of turning around anytime soon.
The latest earnings release from Nautilus was brutal. Blaming supply and shipping constraints, Nautilus reported a sales decline of 11.2% year-over-year to $137.96 million, missing the analyst consensus estimate of $152.73 million.
Adjusted earnings per share (EPS) of $0.03 missed the analyst consensus of $0.10 by a whopping 70%. The company had cash on hand of only $21.5 million as of Sept. 30.
Looking ahead, the company forecasts continued losses for at least the next two quarters, stating that global supply chain challenges continue to pressure its gross margins. Anyway you look at it, Nautilus is not headed in the right direction. That’s why it’s one of the sorry stocks it’s time to sell.
Zillow (ZG)
When examining the stock of online real estate company Zillow, one is reminded of the Bob Dylan lyric: “It’s not dark yet, but it’s gettin’ there.”
Dark days indeed for the company that promised to revolutionize the home buying experience, but has instead struggled to keep its share price above water amid a torrent of bad management decisions and subpar financial performance.
ZG stock has fallen 40% since the end of October after the company’s latest earnings miss, and following the announcement that it is exiting its home flipping business and laying off 25% of its staff. Currently trading at a little more than $63 a share, Zillow stock is now 70% below its 52-week high of $212.40.
During its latest earnings release, Zillow announced that it will incur a write-down of $540 million when it exits its “Zillow Offers” business that had bought houses and quickly resold them.
The staff reductions will amount to 2,000 employees being let go from the company between now and year’s end. Last year, the company forecast that its house flipping business could generate $20 billion a year.
Now, Zillow says a labor shortage and supply constraints have resulted in an inventory glut of houses it needs to renovate and resell. In all, Zillow lost $330 million in this year’s third quarter, down from a $40 million profit in the same period of 2020. Shareholders who are continuing to hold onto ZG stock need to ask themselves: Why?
Sorry Stocks to Dump: Beyond Meat (BYND)
The vegetarian utopia that supporters of meat substitute company Beyond Meat hoped to see come to fruition seems less and less likely to happen. The company just released ugly quarterly results that have led its stock to collapse further in what has already been a dismal year.
BYND stock fell 20% immediately after the company reported a third-quarter net loss of $54.8 million, or $0.87 per share, which was greater than a net loss of $19.3 million, or $0.31 per share, a year ago. Wall Street had expected a loss of $0.39 per share.
The company blamed the mounting losses on higher transportation and warehousing costs, as well as increased inventory write-offs.
Regardless of the reasons, the underperformance was literally like kicking a stock when it’s down. Before the latest 20% decline, Beyond Meat’s stock had been down 25% on the year at $94.48 a share.
That puts the share price 58% below its 52-week high of $221.00. And the outlook for the company that specializes in plant-based hamburger substitutes does not look inspiring. Beyond Meat has forecast net sales of $85 million to $110 million for the current fourth quarter, which is much lower than the $131.6 million Wall Street was forecasting.
At this point, asking shareholders to stick with BYND stock is like asking a kid to eat their spinach.
Disclosure: On the date of publication, Joel Baglole held a long position in ZG. 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.
