In a Sea of Toxic Stocks This FAANG is a Buy
It’s been a rough week for the markets. Unfortunately, many of the stocks you asked me about this week were toxic – stocks to sell now or risk even steeper losses.
But hiding among the losers was a shining opportunity that I don’t want you to miss out on.
07/15/2022 Buy, Sell, or Hold Transcript
Hey everybody! Shah Gilani coming to you with your Friday BS.H, as in Buy, Sell, or Hold, where you guys send me stocks to comment on.
I’ve got four for you today. All interesting, as they always are.
First up Carvana (CVNA). You know what they do. They have those vending machines for cars, but they do a lot more than that! One thing they don’t do, though, is make money. It’s a sell. I’m sorry to have to tell you that, but it’s a sell.
I know it’s painful because all of you who sent in Carvana for me to talk about were probably hoping it was a buy down here.
It’s a sell, with a caveat.
You probably own it higher, so here’s what I suggest… It’s trading around $20 and change right now on Thursday morning – kind of close to its lows of $19.80. I wouldn’t sell it here. I would put another 10% stop on it, eat the pain, and maybe you’ll get a bounce and get out higher. 48% of the floating shares have been shorted, so if we get any kind of market rally Carvana has a chance to pop. I’d use that pop as a chance to sell.
Problems with the numbers… Folks, its operating cash flow is a negative $2.6 billion annually. Are you kidding me? This is a company that has huge revenues at $14 billion, but its net income available to common shareholders is -$259 million. And it’s profit margin… What profit margin?
I think Carvana has some, mm, shall we say accounting issues? I’m not going to go into detail – just some math that I’ve done – but something isn’t right there. I think it’s going to have more problems down the line. I’d sell it and move on. Find someplace else to park your cash.
If you own it, sell on the next bounce.
Next up, Rivian (RIVN). It’s trading around $29 and change… It’s another sell.
Why? Well, this is a $29 almost $29 billion market cap company with revenues of $150 million, but on what? I don’t know what they’re selling. I don’t even know where they’re getting $150 million in revenue. Its profit margin is zero – no, less than that.
And here’s the kicker: the operating margin – and I’ve never seen anything like this – it’s negative 3,592%.
Why would you want to own that? On a hope and a prayer, Rivian is going to be the next big thing for electric trucks… Good luck with that.
A lot of stuff is coming, but it’s not here yet. And if it’s not here and they’re not making money, how long are you going to wait in a market that is subject to downdrafts, right? There may be another time to buy Rivian, but not now. Sell it.
Look at the numbers. Its net income available to common shareholders is negative $5.87 billion. It’s got nice cash positions, about $16 billion or around $18.25 per share. That looks good, but it doesn’t make sense to me. Debt also seems manageable at $1.57 billion. But something about this company bothers me…
Probably the operating cash flow. For the trailing 12 months, it is -$3.29 billion.
Rivian looks good on paper in terms of what they do, what they could be… But just sell it.
Up next is Boeing (BA).
Now, I love Boeing, but I don’t want to own it. Sorry. This is another sell, but with a caveat like Carvana.
The problem with Boeing is in the numbers. Its revenue is $61 billion, yet its net income available to common shareholders is -$4.88 billion and its profit margin is -8%.
You can’t own an airplane duopoly between Boeing and Airbus and lose money. Yes, they’re selling planes, but they have a legacy of problems that they haven’t fixed. They’re obviously trying to address them, but I don’t think they’re done with a lot of legacy issues. Now you have airports, like London Heathrow, basically limiting the number of flights because they just don’t have the help to service everybody at the airport.
That’s going to happen in other places.
So, are they going to sell a lot of planes? A lot of airlines are canceling flights, meaning people don’t need more planes. And there are plenty of planes out there, so… It’s not looking good for BA. At $143, I would sell it. There are plenty of other places to put your cash.
Don’t hang on to your losers, people.
Last, but not least, is Alphabet Inc (GOOG). I think Google down here. I like it a lot down here.
If you don’t already own it, take a shot and buy it here. If you already own it and you’re down, I’d consider buying more.
I think we’ve got a little bit of technical support around $2,100. It’s trading around $2,193 this morning. The lows are $2,040… So I think you can get down to test those lows again. That’s entirely possible in this market, but I would buy it and put a 10% stop on it.
Google can pop, but it’s going to take a while for it to get back up to its old highs.
As a long-term hold, I think it’s a great company. Its revenue is at $270 billion for the trailing 12 months. Its profit margins are at 27%. Its cash is $134 billion and its debt is a very manageable $28.6 billion. So, I like Google down here. Buy it, put a 10% stop on it, and don’t worry about it.
If you lose the 10%, it’s well worth it because if this market turns around in the back half of the year, which is possible, then Google will have a nice run up.
There you have it for today. Three toxic stocks to dump and one FAANG to buy.
Cheers. Catch you all next week.