If there was ever a good time to be putting out a weekly column singling out three stocks to avoid, it was last week. The market tumbled, and the pain was felt even more by the battleground stocks I often name. My three stocks to avoid last week were on the move -- as Netflix, Lucid Motors, and United Airlines were down 24%, 11%, and 11%, respectively -- averaging out to a 15.3% decline.
The S&P 500 slipped 5.7% for the week, so I won last week. My bearish picks have now lost to the market in 13 of the past 14 weeks. This week, I see AT&T (NYSE:T), MicroStrategy (NASDAQ:MSTR), and VF (NYSE:VFC), as stocks that you may want to consider steering clear from. Let's go over my reasons for the near-term pessimism.
Image source: Getty Images.
AT&T
As a recent AT&T shareholder, I can't complain. The telco giant has delivered a 10% return so far this young year, helping eat into some of the losses of my more aggressive growth stocks. I have a couple of reasons to be cautious with AT&T this week.
Let's start with earnings. AT&T reports its fourth-quarter results on Wednesday morning. It's not expected to be a good report. Analysts see flattish earnings growth on a nearly 12% year-over-year revenue decline. There are risks embedded in Wednesday's narrative. What if the there are delays in the WarnerMedia spin off? What if the expected dividend cut will be more substantial? What if the 5G rollout for its flagship service keeps running into more obstacles?
There's also the fear of sector rotation. AT&T has been a market leader so far this year, as investors rotate out of growth stocks into sleepier dividend payers. What if the fierce market correction that accelerated last week takes a breather? Will investors migrate out of AT&T to buy back into heavily discounted former market darlings?
MicroStrategy
It's fair to say that MicroStrategy is a Bitcoin (CRYPTO:BTC) holding company disguised as a software provider. On the surface, MicroStrategy offers enterprise analytics software and services -- but it's pretty lousy at it. MicroStrategy has posted six consecutive years of declining revenue before bouncing back weakly in 2021.
The real appeal to MicroStrategy has been its aggressive approach at hoarding Bitcoin. It has acquired 124,391 Bitcoins over the past few years, shelling out about $3.75 billion to acquire the leading cryptocurrency at an average price of roughly $30,159 apiece. This may have seemed like a great strategy when Bitcoin was approaching $70,000 last year, but it's not a good look with Bitcoin now shedding roughly half of its peak value. With a leveraged MicroStrategy trading at an enterprise value that consists mostly of its Bitcoin stake, it's going to need crypto to recover if it wants to bounce back.
VF
Another potential earnings season dud is VF, even if it's hard to be down on the company behind some of the market's more enduring footwear and apparel brands, including Vans, The North Face, and Timberland. VF reports its fresh financials for its fiscal third quarter on Friday morning.
VF has fallen short of Wall Street's profit targets in two of the past three quarters. Analysts have also been whittling down their bottom-line expectations for the quarter in the past few weeks.
If you're looking for safe stocks, you aren't likely to find them in MicroStrategy, AT&T, and VF this week.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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January 24, 2022 at 08:08PM
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