While no one invests in the capital markets to lose money, you can suffer the same result if you don’t heed the warnings of stocks to dump fast before they tank your portfolio. True, this topic generates discomfort and usually anger. However, discipline represents a key attribute to lever when faced with volatility.
According to ChatGPT, “[c]utting your losses with the stock market is important because it helps to limit your potential losses and preserve your capital.” Specifically, the artificial intelligence platform states that “[b]y cutting your losses, you can free up capital to invest in other opportunities.” You can’t do that if you decide to hold stocks to dump fast before they crash. Also, the chatbot states that by “…avoiding large losses, you can improve your long-term returns.” Therefore, below are the stocks to dump fast before they disappoint.
Rocket Companies (RKT)
At first glance, mortgage provider Rocket Companies (NYSE:RKT) doesn’t seem like an entry among stocks to dump fast before they tank your portfolio. Since the beginning of this year, RKT gained over 15% of equity value. However, since making its public market debut in the late summer of 2020, shares stumbled more than 67%. Fundamentally, Rocket suffers from a relevancy dilemma.
Yes, plenty of folks out there want to buy a home, whether for the first time or because they’ve outgrown their original home. Unfortunately, with the Federal Reserve committed to driving up the benchmark interest rate to combat stubbornly high inflation, Rocket’s total addressable market will almost surely diminish. Therefore, it could be one of the risky stocks to dump fast before they tank your portfolio.
As well, with a three-year revenue growth rate of 61% below zero and a slightly negative trailing-year net margin, Rocket seems too high of a risk. Unless you’re a speculator, you should probably stay away.
On paper, Lyft (NASDAQ:LYFT) seems an incredibly relevant idea. In Jan. 2019, the Pew Research Center reported that more Americans used ride-hailing apps. Understandably, this narrative took a hit because of the Covid-19 crisis. However, fears of the SARS-CoV-2 virus have since faded. Plus, people want to get out. Therefore, LYFT should be one of the securities to buy.
Unfortunately, LYFT might slip among the stocks to dump fast before they tank your portfolio. It’s not because I hate the company: I use it and love it. But let’s be real. It faces severe competition from rival Uber (NYSE:UBER). Plus, with the latter entity commanding a sizable footprint internationally, it’s just more utilitarian for riders.
Plus, Lyft doesn’t have the greatest financials to go head-to-head with Uber. For example, its Altman Z-Score sits at 3 points below zero, indicating deep distress and higher probability of bankruptcy. Also, its long-term revenue trend is negative, as is its trailing-year net margin. Regrettably, it’s one of the stocks to dump fast before they crash.
National CineMedia (NCMI)
At a cursory glance, National CineMedia (NASDAQ:NCMI) doesn’t seem an appropriate idea for stocks to dump fast before they tank your portfolio. Since the start of this year, shares of the cinema advertising company gained 28% of equity value. However, just drill out a little bit. In the past 365 days, NCMI hemorrhaged more than 77%. Lifetime, we’re looking at losses approaching 99%.
Fundamentally, it’s difficult to classify NCMI as anything more than stocks to dump fast before they lose value. While the box office implemented a significant recovery effort, Hollywood still reels from the disruption. Financially too, the company presents a messy profile. Perhaps most prominently, National CineMedia suffers from a poor balance sheet. Worryingly, its cash-to-debt ratio sits at 0.06, worse than 90% of the competition. Also, its three-year revenue growth rate fell to 19% below zero. Not surprisingly, its net margin is also below breakeven to the tune of 11.52%.
Sonic Foundry (SOFO)
An information technology company, Sonic Foundry (NASDAQ:SOFO) produces software for distance learning and corporate communication. Originally, Sonic gained fame for developing Vegas Pro and Sound Forge. Since the Jan. opener, SOFO sits at perfect parity (at time of writing). However, don’t let that fool you. In the trailing year, shares stumbled more than 57%.
As Gurufocus warned, SOFO could be a possible value trap. Looking at the data, it’s difficult to view Sonic as anything more than one of the stocks to dump fast before they tank your portfolio. Where to start? First, its balance sheet is horrible, with an equity-to-asset ratio of only 0.04. Also, its Altman Z-Score of 12.39 below zero indicates deep distress.
Operationally, the red ink continues. Its three-year revenue growth rate sits at 22.5% below breakeven. For “profitability,” the company’s net margin is 39.41% below parity. While it might have some speculative value, for conservative investors, it’s one of the stocks to dump fast before they disappoint.
Ascent Solar Technologies (ASTI)
If the market graded all securities based on their fundamental relevance, Ascent Solar Technologies (NASDAQ:ASTI) wouldn’t be up for consideration for stocks to dump fast before they tank your portfolio. With so much emphasis these days on green renewable energy, Ascent’s photovoltaic enterprise aligns with the broader ethos. Unfortunately, the market doesn’t care. Since the Jan. opener, ASTI lost more than 79% of equity value.
Ordinarily, that’d be enough for most folks to label ASTI one of the risky stocks to dump fast before they tank your portfolio. However, if you need some extra coaxing, just look at the financials. Glaringly, Ascent suffers from a poor balance sheet. Its equity-to-asset ratio sits at 0.25, worse than 92.44% of sector peers. Also, its Altman Z-Score fell to 35.63 below zero, indicating ridiculous depths of distress.
Operationally, the company’s three-year revenue growth rate sits at 72.9% below zero. As well, its operating and net margins have fallen so deep into the abyss, it’s not worth the extra effort to write out the digits.
Mobiquity Technologies (MOBQ)
Well, the first clue that Mobiquity Technologies (NASDAQ:MOBQ) ranks among the stocks to dump fast before they tank your portfolio is its price point. Usually, securities trading hands at 17 cents per share don’t last that long. While its core business of data mining and creative advertising technologies intrigue, competition and a troubled economy present major headwinds. Also, there’s that thing about losing over 72% of equity value since Jan. that may trouble investors.
Moving onto the financials, investment resource Gurufocus issued six red flags about MOBQ stock, starting with long-term debt. Over the past three years, Mobiquity issued $1.66 million of debt, which is steep relative to its minimal assets. Understandably, another red flag centers on poor financial strength. Remarkably, the company’s Altman Z-Score sits at 120.55 points below zero. I don’t think I’ve ever seen an indicator reading that poor.
If these stats didn’t solidify MOBQ as one of the risky stocks to dump fast before they tank your portfolio, consider the terrible operational stats. On the top line, its three-year revenue growth rate is 53.1% below zero. Its net margin fell to 205.47% below the breakeven level.
Energy Focus (EFOI)
If you’re just looking at the year-to-date performance of Energy Focus (NASDAQ:EFOI), it doesn’t seem like a bad idea, gaining nearly 33% of market value. However, in the past one-year period, shares stumbled almost 44%. Plus, they trade hands at only 45 cents. At their peak, they traded well into the hundreds. And that means lifetime, EFOI gave up almost 100% of value.
To be sure, its LED lighting technology brings efficiency to several popular enterprise-level clients. Unfortunately, that might not be enough for investors to overlook the ugly financials. If you thought Mobiquity Technologies above had it bad, Gurufocus issued nine red flags for Energy Focus. Up top, its days inventory has built up, indicating operational difficulties. As well, the company keeps issuing new debt.
Not to belabor the point but the investment resource also cited poor financial strength as well as a deeply negative Altman Z-Score. Moreover, is three-year revenue growth rate sits at 47.8% below zero. And its net margin is 172.24% below parity. Combined, these factors place EFOI amid the ranks of stocks to dump fast before they crash.
On the date of publication, Josh Enomoto 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.