The 7 worst stocks to buy now
I generally don’t like to write about the worst stocks to buy now (or similar topics) because it invariably offends members of the Internet Defense League. It’s not the greatest experience to receive a flood of messages from people defending the honor of companies that make fun of them. However, in this case, I’m all for it.
Recently, my colleagues took to ChatGPT to ask the AI program what it thinks are the best or worst stocks to buy right now. I did something similar but with the Gurufocus.com investment resource. Interestingly, the platform offers a filter called “Probability of Financial Distress (%).” And so, I entered the worst possible range – 95% to 100% probability of distress.
For full disclosure, I have not used any other filters other than not including the following share classes: OTC, Trusts and Master Limited Partnerships (MLPs). What you see in front of you are the seven worst stocks to buy right now. Please don’t shoot the messenger.
|FRC||Bank of the First Republic||$23.03|
|FIE||Faraday Future Smart Electric||$0.45|
Bank of the First Republic (FRC)
Topping the list of worst stocks to buy now, Bank of the First Republic (NYSE:FRC) should really surprise no one. The only exception is if you haven’t heard of the latest banking fiasco. Otherwise, you know that several market watchers have raised red flags about FRC. Although it saw a sharp rise on Thursday, in the last five sessions through the end of March 16, the FRC fell 50.4%.
This stat alone justifies the inclusion of the worst stocks to buy now. Yet, without context, FRC could appear as a contrarian buying of sterling. For example, the market values stocks at a multiple of 4.16. It also values them at a forward multiple of 5.72. No matter which way you look, First Republic seems undervalued. However, Gurufocus.com warns that this is a possible value trap. Currently, one of the major concerns of the company is its balance sheet. It has a cash-to-debt ratio of 0.28x, ranked worse than nearly 83% of the competition. Frankly, you should probably avoid this stock.
Archer Aviation (ACHR)
Coming in at second place on this dubious list of the worst stocks to buy now is Archer Aviation (NYSE:ACHR). An American company marketing electric vertical take-off and landing (eVTOL) aircraft, Archer sounds compelling from a narrative standpoint. Unfortunately, at some point, investors want to see the stories turn into a credible path to profitability.
Unfortunately, it doesn’t quite take off. Of course, since the January open, ACHR has gained over 38% of its net worth. However, in the past 365 days, security has dropped by almost 37%. Since its public market debut (via a reverse merger with a blank check company), ACHR has plummeted 73%. Interestingly, Archer enjoys a fairly stable balance sheet. At present, its cash-to-debt ratio stands at 23.93 times, higher than 85.56% of its peers. However, it is profitability that kills the business for many would-be speculators. In a pre-revenue business, the business is constantly losing money. As risk sentiment fades in the market, ACHR ranks among the worst stocks to buy right now.
Nuvation Bio (NUVB)
Based in San Francisco, California, Nuvation Organic (NYSE:NUVB) had a rare positive performance on March 16, gaining more than 2%. That’s about as good as it gets for the oncology specialist, who focuses on hard-to-treat cancers. Since the start of the new year, NUVB has sold nearly 17% of its net worth. In the last 365 days, it has fallen by more than 68%. Initially, Nuvation does not appear to rank among the worst stocks to buy now. In particular, it has a very solid balance sheet. Currently, its cash-to-debt ratio stands at 155.17 times, more than 77% of that of the industry. Additionally, its equity-to-assets ratio is 0.98 times, which ranks it better than nearly 98% of the competition.
However, Nuvation represents a purely ambitious business, which means that it does not generate any income. At a time when investors are moving away from risky assets, NUVB appears particularly risky. To be fair, analysts consider NUVB a consensus Moderate Buy with a price target of $4.33. While this implies 158% upside potential, this could be a case of unwarranted euphoria. I let you be the judge.
Faraday Future (FFIE)
A struggling electric vehicle company, Faraday’s future (NASDAQ:FIE) should be an unsurprising inclusion for the worst stocks to buy now. With the consumer economy under myriad pressures, now is not the time to acquire big-ticket items. Additionally, the company’s FF 91 may feature a starting price of $180,000. That might be the killer over there. Faraday doesn’t have to charge that much without establishing a viable brand.
It seems that the market has taken over this framework. While the FFIE has gained 57% on the year so far, over the one-year period it is down 91%. Looking at his finances, the situation becomes even more problematic. Without revenue, the business faces huge losses. Therefore, it presents really ugly statistics for return on equity (ROE) and return on assets (ROA). To be fair, Faraday has an average track record, if that’s even a good thing. However, no analyst covers it. And with a stock price of 42 cents, he’s considering delisting.
Mullen Automotive (MULN)
The name that scares everyone who covers the market, Mullen Automotive (NASDAQ:MULN) comes in as the fifth worst stock to buy right now. Again, I’m just reading the list that Gurufocus.com provided as is. However, if we are objective, the MULN’s poor ranking should not come as a shock. Of course, Mullen has made significant progress. Still, it will take a Herculean effort to convince customers to bet big on a no-name vehicle.
Client market concern aside, Mullen faces a similar problem that plagues other worst stocks to buy now: no income. While investors were ready to extend lifelines to these companies in a low interest rate environment, I don’t know how they will feel in a rising interest rate environment. Additionally, with banking sector fears clouding the broader ecosystem, MULN looks unnecessarily risky. Moreover, it is completely destroyed in the charts. Since the January open, MULN has cratered over 53%. Over the previous year, it was down 94%. It may be time for investors to recognize the obvious dangers and run away.
Therapeutic Prelude (PRLD)
Based in Wilmington, Delaware, Therapeutic Prelude (NASDAQ:PRLD) represents a clinical-stage biopharmaceutical company. Specifically, she designs and develops a pipeline of novel small molecule therapies that precisely target key drivers of cancer cell growth and resistance. Although scientifically convincing, the PRLD faces credibility problems. Over the one-year period, the shares fell nearly 22%.
In fairness, some metrics suggest that PRLD doesn’t deserve to be listed among the worst stocks to buy right now. Again, let me stress that I’m only reporting what Gurufocus.com spat out. Also, I agree that Prelude has a solid track record. In particular, its cash-to-debt ratio stands at 110.11 times, higher than the industry’s 77.68%.
So where does the biotech outfit go wrong? Unfortunately, Prelude is another pre-revenue company. As macro fears weigh on investor sentiment, market participants are likely to lose patience for these entities. Additionally, key stats such as ROE and ROA fell into negative territory.
GeneDx Holdings (WGS)
Based in Stamford, Connecticut, GeneDx Funds (NASDAQ:WGS) is a specialist in whole genome and exome testing. Through its products, GeneDx facilitates a comprehensive view of a patient’s genetic makeup. Although offering a fascinating scientific profile, WGS simply failed to capture the interest of investors. Of course, it has gained almost 27% since the January open. However, over the previous year, WGS lost nearly 89% of its market value.
Listen, the reality is that every time a public security crashes 89%, you’re probably going to end up as one of the worst stocks to buy right now. Therefore, I can’t fault Gurufocus.com for ranking it so high (or is it so low?). Financially too, the circumstances are not improving much for GeneDx. Operationally, the company suffers from a three-year revenue growth rate of 5.2% below parity. In addition, its free cash flow growth rate over the same period is 90.8% below break-even. Unsurprisingly, GeneDx has deeply negative operating margins and net margins. Although it has some strengths in the balance sheet, overall it is mediocre. Therefore, WGS represents one of the worst stocks to buy right now.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.