Drop These “Dead Money” Stocks Before They Drag Your Portfolio Down
Knowing when to let go of a stock is just as important as knowing what stocks to buy. Because, no matter how amazing your winners are, the dead money will sink your portfolio like a fine pair of concrete shoes.
Today’s Buy, Sell, or Hold will be light on the buys for this reason. A quality stock can turn foul in an instant if we aren’t vigilantly monitoring the stocks already sitting in our portfolios, especially in markets like this.
So, if you’re on the hunt for bargains, avoid these stocks. If you own these stocks, dump them today.
07/22/2022 Toxic Stock List Transcript
Hey everybody. Shah Gilani here with your Friday BS.H, as in Buy, Sell, or Hold — where you guys send in a bunch of stocks and I tell you whether I think they’re a buy, sell, or a hold.
I got a three-fer for you today. And first up is The RealReal Inc. (REAL). Now quite a few of you have asked me about this stock, this company in the past. I’m addressing it today because now you’re sending me messages like, “Oh my gosh. Should we buy it here? It’s so cheap. Should I hold onto it? I own it higher.”
It’s cheap, alright. It’s cheap at $2.82 cents. Yeah, that’s a low price. This is down from the $30 range and for good reason. The RealReal… I like the business. Online sales of consignment stuff. I think it’s a great business model. It doesn’t make any money. It really isn’t working right now. So it’s a sell.
Yes. It’s a sell even down here at $2.82 cents. Why would you wanna play this? Sometime you guys say, “Oh, look, it’s got a nice base. It’s basing. It’s looking like it can go back up to the thirties.”
Just because the stock was $30 doesn’t mean it’s gonna go back up. It being down at $2.82 from $30 means is it’s down for a reason. And REAL deal on this is… And this is the interesting stuff here. This is a $230 million market cap stock, which somebody sent me a note on, “Hey Shaw, $230 million market cap. Guess what? It has $361 million in cash. It has more cash than it’s market cap. Doesn’t that look good?”
No, it does not look good because you gotta keep looking. Keep looking, keep looking because the debt is $600 plus million dollars because the profit margin on this company is, are you ready for this, minus 46%. No wonder did they lose about, hmm, about a quarter of a billion dollars over the trailing 12 months. So yes, it looks good. Cuz the graph has come down. But it’s a sell. It’s a bad stock. You do not wanna be bottom fishing for a company like this for a stock like this in this market, there may come a time for sure. And it may have some popped because there’s a bunch of short interest out there on that could cause the stock to pop. Now on that. Do you wanna buy the stock down here? Just because it’s cheap at $2 and change? No, it’s a sell.
And next up lot of questions about Lyft, Inc. (LYFT).
I love Lyft, at least the service. As far as the company, not so much. As far as the stock, not at all because here’s another one where you are asking me, “Hey, doesn’t it look good down here. It’s basing. It’s had an awful slide down and now is the time to buy, right? It’s bargain hunting time!”
No, it’s not bargain-hunting time just because the stock is trading at $14.20 (down from the fifties). I get it. That’s a big drop and it looks like it could pop, but just because a stock falls doesn’t mean it’s going to pop. Often, it falls for a reason.
LYFT is pretty interesting in the sense that it has a $4.5 billion market cap and it has really good revenue, right? About $3.5 billion in revenue. That’s pretty good. I’m impressed by that until you get to the profit margin and you realize it’s negative 22%. No wonder they lose money. All right. So as far as losses go, it has $3.47 billion in revenue losses, from the trailing 12 months. About three quarters of a billion dollars in losses. Negative profit margin is not good people. It’s not good. So yes, it looks cheap — down from the high fifties, down to $14 in change. I know. Yeah. There’s a gap to fill and that looks really good. But it’s a sell people. It’s a sell cuz it’s a bad stock right now.
Again, you don’t want to take a flyer on a company like Lyft. Great model, great service. I like it, but that doesn’t mean it’s a buy. It doesn’t mean it’s a buy cuz it’s cheap. It’s gonna get cheaper. It’s a sell. Don’t waste your money. This is not the time to be buying bad companies. Not the time to be buying bad stocks. There will come a time when the market turns, when the economy turns, but we’re not there. Then some of these will be worth a speculative buy. Not now.
Last, but not least: Cloudflare, Inc. (NET). They do cloud services cloud services. I love the cloud, but Cloudflare? N E T should be N OT.
Why? Because if you wanna get into the cloud, get into Amazon, get into Microsoft. Those are the cloud business you want to get into right now. Cloudflare is a nice idea. It did really well since its IPO in 2019. It went straight up because all-things-cloud were all-things-money.
Except CloudFlare then went right back down.
Just because CloudFlare has decent revenue, $730 million (that’s against the $15 billion market cap). $15 billion market cap for a company that has only $730 million in revenue and losses about a quarter of a billion dollars a year… Why? Cuz the profit margin is negative 35.83%. Its operating cash flow down to $5.69 million over the trailing 12 months. It’s gonna have a problem.
Cloudflare is a sell. Yes, I know it looks good because it’s at $54 in change down from something like $220 plus not too long ago. Wow. That’s a bargain, right? Cha not.
You gotta understand just because prices come down (and they’ve come down from lofty levels) doesn’t mean they’re a bargain. They’ve come down for a reason in a market like this. You don’t want to be trying to buy bottom fishing on companies that have negative profit margins. These are bad companies right now. They’re certainly bad stocks right now. Sell ’em all.
I’ll catch you next week. Cheers.