In a market like this, bottom fishing is more like trying to catch a falling knife, to mix my market metaphors. That’s particualrly true when it comes to F-rated stocks.
There’s a gigantic shift going on between the ZIRP (zero interest rate policy) economy the world has been in for over a decade and the new economy as central banks cede control.
But in the middle of all this are huge amounts of pandemic stimulus money sloshing around, a supply chain crisis that may last another year and energy prices at highs because OPEC+ (the plus includes Russia) has promised to pump more oil but hasn’t.
The markets — and institutional investors — loved the low interest rate, low growth economy we had for so long. But the pandemic blew that up.
Now everyone is scrambling for the next normal. And this is no time to be holding stocks that may get hit like the rest, but have little chance of making it back anytime soon. With that in mind, here are F-rated stocks I’ve identified in Portfolio Grader that you should avoid at all costs.
- Hyster-Yale Materials Handling (NYSE:HY)
- Peleton (NASDAQ:PTON)
- Boston Beer Co (NYSE:SAM)
- Sutro Biopharma (NASDAQ:STRO)
- Wayfair (NYSE:W)
- Coeur Mining (NYSE:CDE)
- Ribbon Communications (NASDAQ:RBBN)
F-Rated Stocks to Avoid: Hyster-Yale Materials Handling (HY)
As I mentioned in my intro, one of the biggest challenges in the economy today is the supply chain issue. China maintains its zero-Covid policy, which means if people test positive, they don’t work.
When you’re one of the largest export manufacturing countries in the world, that makes a mess out of things for a lot of other economies. And given the fact that the U.S. has handed over much of its means of production to Chinese manufacturers, it’s especially difficult in the U.S.
HY makes lift trucks. Those are the vehicles that lift everything from the containers that come off container ships to fork lifts that move things around warehouses.
Generally speaking, this should be a great business as e-commerce rises and distribution points expand. But today, and into the near future, distribution channels will continue to be disrupted. And that means just filling the existing warehouses and dockyards is a challenge.
HY stock has lost 58% in the past 12 months, so its 3% dividend is just cold comfort.
Ah, how the mighty have fallen. Once the poster child of pandemic unicorns, this at-home fitness company has gone from the lofty 52-week highs of more than $157 a share to just $30 a share today.
It was certainly a momentum play to be remembered. But its staying power should also be a cautionary tale of how super-charged growth can disrupt even the best companies. Also, a management team that wasn’t prepared to scale up so quickly meant there were growing disconnects between the customers and the company.
And given the volatility of the meme stock world, it’s tough to manage cash flow as investor money flows in and the flows out even more rapidly. The business model takes a beating.
PTON still has a market cap of $8 billion, but even after losing 84% in the past 12 months, the stock still has 12% short interest betting on more downside.
F-Rated Stocks to Avoid: Boston Beer Co (SAM)
The biggest trouble with SAM stock isn’t supply chain issues or higher inflation. It’s the fact that younger demographics are drinking less beer. And that was evident in the company’s recent guidance in mid-January.
In today’s market, lowering guidance is a loud siren and flashing light for short sellers to rush toward and long investors to run away from. Now, a year ago guidance — good or bad — was taken with a grain of salt since the markets were hot and no one was paying attention bad news.
That’s evident in the fact that this stock has a current price-to-earnings ratio of 52x and that’s after losing 62% and teasing its 52-week lows. SAM has certainly gotten ahead of itself. It also still has almost 7% short interest looking for more downside.
Sutro Biopharma (STRO)
This clinical stage biopharmaceutical company is focusing on cancer and autoimmune therapies. Its current market cap is $452 million, so it’s a small company that is very dependent upon products in trials.
Unfortunately, its ovarian cancer drug that was going through trials fell short in phase one. It showed promise, but the risks were too high, due to a significant side effect of treatment. That’s bad news for a company this small since it takes significant funding to get a drug through trials.
It also takes a lot of time. And now STRO has to go back to the drawing board on this one. It still has a decent pipeline and funding from a handful of deep-pocketed drug companies. But this is a setback.
STRO stock has lost 65% in the past 12 months and still has more than 5% short interest rooting against it. This is not the time.
F-Rated Stocks to Avoid: Wayfair (W)
If there’s one company that symbolizes the destructive effects of the supply chain crisis, it’s W. For quite a while, its e-commerce driven model was fueling its growth and popularity.
It had a vast selection of home furnishings and décor but didn’t have to warehouse much of the inventory. The modern supply chain meant you could order a product, the order was shipped to the manufacturer in China, and then it was shipped to your house. Seamless and quick. A game-changer for the home furnishings industry.
Until now. Customer additions and net revenue for customers in Q4 2021, were at pre-pandemic levels. Fewer people are buying and those that are, are buying less. And things aren’t looking up moving forward.
W stock is down 50% in the past 12 months, yet it still has a P/E of 179x. Not surprisingly, there’s a massive 23% of short interest waiting for more downside.
Coeur Mining (CDE)
Silver and gold mining stocks have been under pressure for a while now. First, the fans of precious metals as a hedge against inflation and stocks are no longer in the majority. All the interest is being drawn about by cryptocurrencies, blockchain and defi technologies.
It used to be that when the markets dropped, gold prices would rise because hedging with the Midas metal increased. That’s no longer the case. Gold is in a world of its own. Stocks sell off and gold sells off as well.
Gold prices have been in a trading range for about a year now. And now that the market is falling apart, gold is still not moving. Also, gold isn’t as popular with institutional investors any longer. And financial institutions are much more interested in the rising revenue from growing demand in crypto.
CDE stock is down nearly 52% and there’s no reason to hope anything is going to change soon.
F-Rated Stocks to Avoid: Ribbon Communications (RBBN)
RBBN is in the optical networking world, developing and supplying fiber optic cable, switches and software to customers around the world. It has customers in more than 140 countries with more than 80 global offices.
With the advent of 5G upgrades you would think this would be a great sector to be in right now, given the infrastructure bills in the U.S. and Europe. But think again. Much of that equipment is made in China or is shipped from the region.
That means supply delays and project delays. And that means lost income and revenue. RBBN stock’s last quarter saw the company report a loss. And the markets punished it.
RBBN stock has lost 58% in the past 12 months. And until the supply chain has strengthened its weak links, it’s best avoided.
On the date of publication, Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.