My “three stocks to avoid” column last week was a dud. The three stocks I thought were going to move lower for the week — Oracle, Beyond Air, and Blink Charging — finished up 1%, up 5%, and flat, respectively, averaging out to a 2% gain.
The S&P 500 experienced a 5.8% drop, and the investments I figured would fare worse did a lot better. I was wrong, but I have still been correct in 24 of the past 35 weeks.
Where do I go to next? I see Rite Aid (NYSE: RAD), MicroStrategy (NASDAQ: MSTR), and CVR Energy (NYSE: CVI) as stocks you may want to consider steering clear of this week. Let’s go over my near-term concerns with all three investments.
Time hasn’t been kind to Rite Aid since it rejected a buyout proposal to take the drugstore operator private at $14.60 a share three months ago. The stock begins this holiday-shortened trading week at $6.20.
It doesn’t help that Rite Aid also posted a much larger quarterly loss than analysts were expecting in April. Adding fuel to the fire sale, the drugstore chain reports fresh financials on Thursday morning.
There’s always hope that Rite Aid eventually finds a suitable exit strategy. It never truly recovered from when shareholders shot down a proposed pairing with Walgreens a few years ago. It also has assets it may be able to unlock. Deutsche Bank stunned the market when it slashed its price target on Rite Aid from $16 to $1 three months ago. Deutsche Bank analyst George Hill has since boosted that price goal to $2, and then $4 on the potential for Rite Aid to raise money by selling its pharmacy benefits manager business, but he’s sticking to his bearish sell rating. The upside is there if Rite Aid can ever get beyond its arrogance, but for now it has a pending quarterly earnings update, and that didn’t go well last time.
There’s been something wrong with the crypto market in recent months, and the chaos is only intensifying. We’ve even seen a stablecoin and a decentralized finance platform slam on the brakes in the past couple of weeks. The market’s confidence in digital currencies has been rattled, possibly to the point where it’s irreversible. Where does that leave MicroStrategy?
CEO Michael Saylor has gone all in on Bitcoin (CRYPTO: BTC). It’s a decision that seemed brilliant when he invested billions in the top crypto as it was rising. But it’s been disastrous on the way down. More to the point, the enterprise software company that Sailor should be focusing on was never exciting. We’re talking about declining annual revenue in six of the past seven years. Bitcoin’s crash is showing us that the emperor has no clothes, but it’s not as if MicroStrategy itself was a snappy dresser before the costly infatuation with the imploding crypto market.
After back-to-back weeks of greater-than 5% slides, I want my third pick to be hopeful for a general market rebound. This means betting against an investment that’s been rising as general markets are falling. One of the largest companies to have more than doubled in 2022 is CVR Energy.
The petroleum refiner and maker of nitrogen fertilizer is booming alongside most oil and gas stocks this year. With petroleum prices soaring, it’s easy to see why the stock is up 105% year to date. However, the good times aren’t expected to last. Revenue and earnings are skyrocketing this year, but analysts see an 8% revenue decline come 2023, with earnings cut nearly in half. Looking back, it has also posted a larger-than-expected adjusted loss in two of the past three quarters. If the overall market starts to recover, there will be some rotation out of this red-hot sector. CVR Energy is doing a lot of things right, but even winners need to take a breather now and then.
It’s going to be a bumpy road for some of these investments. If you’re looking for safe stocks, you aren’t likely to find them in Rite Aid, MicroStrategy, or CVR Energy this week.