For many people, the most important thing about investing is knowing which stocks to buy, and when to buy them. If you’re a buy-and-hold investor, then you’re going to keep your picks for a long time. If you’re a more active trader, then you’re also looking for the perfect time to take your profits and move on.
It’s critically important for any investor to also be able to recognize which stocks to avoid – because those are the stocks that will wreck your portfolio if given the chance.
This has been an interesting year in the market so far. Tech stocks are continuing to rule the day, with the tech-heavy Nasdaq composite up nearly 10% on the year. The S&P 500 is doing well as well, up 7%. Meanwhile, the benchmark Dow Jones Industrial Average shows only a 2% gain for the year.
With those kinds of gains on the table, it would be tragic to bury your money into F-rated stocks. The “F” rating comes from the Portfolio Grader – a free service that evaluates stocks on an “A” through “F” scale based on growth, earnings performance, analyst sentiment and trading momentum.
No tool is infallible, but I’ve found the Portfolio Grader to be an ideal system to help investors of all stripes ferret out which stocks are worth your attention and which ones are stocks to avoid. The names on this list definitely fall within the latter category.
Lucid Motors (LCID)
It’s an easy choice to kick off any list of stocks to avoid with the struggling electric vehicle company Lucid Motors (NASDAQ:LCID). Once thought to be a legitimate rival to Tesla (NASDAQ:TSLA), Lucid has failed to scale its business and is a major disappointment.
How can any company be considered a possible Tesla killer when it only produced 6,001 vehicles last year? In the first quarter of this year, Lucid manufactured another 1,728 vehicles and delivered 1,967.
Bulls will point out that Lucid managed to beat expectations for revenue in the first quarter, bringing in $173 million versus the expected $154 million. But that was only because of Lucid’ vehicle sales to the Saudi Arabian government. When you look at external customers, demand for Lucid vehicles is falling. (Saudi Arabia’s Public Investment Fund has a 60% stake in Lucid.)
LCID stock is down 32% this year and gets an “F” rating in the Portfolio Grader.
Akoustis Technologies (AKTS)
Akoustis Technologies (NASDAQ:AKTS) is a North Carolina company that designs, develops, manufactures and sells radio frequency filter products. It operates a 125,000-square-foot wafer manufacturing facility in New York to design and build filters and other semiconductor devices.
But its most recent earnings report was a major disappointment. Revenue in the third fiscal quarter of 2024 was $7.51 million, up 2.1% from a year ago, but missed analyst estimates by 12%.
The company posted a net loss of $23.3 million, which was a 50% increase from a year ago, and lost 26 cents per share versus a loss of 23 cents per share a year ago. The EPS mark was particularly disappointing, as it missed analysts’ estimates by 86%.
The quarter ended with Akoustis having only $15.2 million on cash on hand and assets of $28.5 million, down from $43.1 million in cash and total assets of $59.8 million a year ago. So is no surprise that Akoustis is now selling an additional 50 million shares of stock, priced at 20 cents per share, in an effort to raise $10 million to fund operations.
AKTS stock is down 79% this year and gets an “F” rating in the Portfolio Grader.
Verastem (VSTM)
Verastem (NASDAQ:VSTM) is a biopharmaceutical company that is working on treatments for cancer. The company is focused specifically on RAS pathway-driven cancers and is developing treatments targeted toward mutated RAS genes.
Verastem is seeking FDA approval for avutometinib and defactinib combination for patients with recurrent KRAS gene mutant low-grade serous ovarian cancer. The rolling review process allows the company to submit completed sections of an application for FDA review before all sections are available.
While this could be a great breakthrough for patients, investors would be wise to be cautious. Clinical trials and FDA approval are costly, time-consuming, and sometimes yield no results. Developing a breakthrough drug can lead to highly profitable rewards.
Verastem has $110.1 million in cash at the end of the first quarter, having losing $33.9 million in the period. Research and development costs were $17.7 million, and selling, general and administrative expenses were $10.4 million.
The company is investing more in preparation for a potential launch of avutometinib and defactinib treatment. The stock price dropped 59% when it announced its FDA approval plans.
Once trading as high as $14 per share, VSTM stock is down to penny stock territory now, having lost 56% in value so far on the year. It gets an “F” rating in the Portfolio Grader.
Mullen Automotive (MULN)
Mullen Automotive (NASDAQ:MULN) is another struggling electric vehicle company.
Like Lucid, it had high expectations that it would challenge Tesla, and its encountered similar issues with trying to scale the business to make a dent in the EV field.
Mullen had a wild 2023 just trying to stay relevant. On three separate occasions it triggered a reverse stock split to keep the stock price over $1 per share and maintain Nasdaq compliance. The last of those splits was a 1-for-100 split that on paper pushed the stock price higher. But in reality, the value of Mullen shares fell by 99% over the course of the year.
Mullen’s strategy is now to go into commercial EVs. Its expanding its distribution network into Eastern Europe and it signed a new deal to supply 40 commercial vehicles to a company in Switzerland. Mullen also completed the first phase of its battery line integration at its California plant in hopes of commercializing EV battery packs.
While it finally saw some revenue in the second quarter of fiscal 2024 — $33,000 – it also saw losses of $177.3 million. And now with only $22.3 million in cash and cash equivalents left, Mullen will need to find more funding if it’s going to keep up this level of cash burn.
MULN stock is down 73% this year and gets an “F” rating in the Portfolio Grader.
Takeda Pharmaceutical (TAK)
Takeda Pharmaceutical (NYSE:TAK) is a Japanese pharmaceutical company that has a large presence in the U.S. as well. The company traces its roots back to the 18th century and currently operates in 80 countries.
Its top-selling drug is Entyvio, which treats patients with ulcerative colitis and Crohn’s disease. Revenues in 2022 for Entyvio were $4.5 billion.
It also makes Vynanse, which is a popular drug for attention deficit disorder. But it lost exclusivity for the drug in 2023 and generic competitors are now on the market.
Earnings for 2023 were 4.26 trillion yen, ($272.6 billion), up 5.9% from a year ago. But net profit was 144 billion yen and EPS was 92 billion yen, both down 54% from a year ago.
Takeda forecast 2024 revenue of 4.35 trillion yen, with core revenue flat to slightly declining. It also forecast a 10% decline in operating profit and an EPS decline in the mid-10%.
TAK stock is down 6% this year but doesn’t have a strong growth story for 2024. It gets an “F” rating in the Portfolio Grader.
Cue Health (HLTH)
Cue Health (NASDAQ:HLTH) is a tiny health care company with a market capitalization of only $9 million. The San Diego-based company provides a platform that provides patients and health care workers with access to lab-quality diagnostic tests at home and in a doctor’s office.
Its Covid-19 test was the first home use respiratory tests to get approval from the FDA.
Unfortunately for Cue, people aren’t testing for Covid-19 in 2024 at the same frequency they were in the last few years. In addition, Cue received a warning letter in May from the FDA about its home Covid-19 tests.
The letter alleged that the company made changes to the test without approval from the government oversight agency. The FDA issued a public statement saying not to use the Cue test because it could issue a false result.
Cue says it’s evaluating the letter but has not made a further comment. It was scheduled to issue its first-quarter earnings report on May 13 but has not done so.
HLTH stock is down 62% this year and gets an “F” rating in the Portfolio Grader.
Blue Star Foods (BSFC)
Blue Star Foods (NASDAQ:BSFC) is a Miami-based seafood company. It imports, packages and sells crab meat and salmon in many major grocery stores throughout the U.S.
But with a limited product base, Blue Star has some inherent risks. The population of crab can fluctuate because of disease or biological issues. Market demand can also factor into Blue Star earnings. In addition, the worldwide supply of natural fish is dropping and causing many countries to limit the amount of seafood that can be caught and harvested.
Blue Star had revenue of $2.3 million in the first quarter, up from $1.9 million a year ago. The net loss was $1.1 million, from a loss of $2 million in the same quarter a year ago.
Blue Star, which recently executed a reverse 1-for-50 stock split to keep its stock price in compliance with Nasdaq listing rules, is down 68% this year. It gets an “F” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
