Not all stocks are worthy of investor capital. Today, we’ll be looking at three poor-performing stocks to avoid.
As the market marches higher this year, these stocks are sliding. Whether it is because they have lost their competitive edge, have poor financials, or are producing outdated products, the best days of the companies below appear to be in the rearview mirror.
Some investors might be tempted to go bottom-fishing in hopes of a rebound. This is a risky approach, as many stocks with poor fundamentals can continue falling for months or even years.
Rather than try to catch a falling knife, put these poor-performing stocks on your list of stocks to sell or, at the very least, avoid.
Novavax (NVAX)
Shares of pharmaceutical company Novavax (NASDAQ:NVAX) are down 79% in the past 12 months and the company is in survival mode.
Novavax got its Covid-19 vaccine to market late, exacting a heavy toll on the company and its share price. Its market capitalization has plummeted from $3 billion a year ago to less than $700 million today. Meanwhile, the company has warned on several occasions that it is in danger of running out of cash to continue operations.
Of course, Novavax is in the process of cutting costs, announcing it will lay off 25% of its global workforce. The drug maker is also consolidating facilities and infrastructure and has slashed its research and development (R&D) budget. Still, Novavax is climbing a steep hill and continues to face stiff competition from rival Covid-19 vaccine makers Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA).
According to the U.S. Centers for Disease Control and Prevention, fewer than 90,000 shots of Novavax’s Covid-19 vaccine have been administered in the U.S. That compares with 360 million vaccines and boosters from Pfizer and more than 230 million from Moderna.
If there’s a stock to sell now, NVAX is it.
Lumen Technologies (LUMN)
Next up we have Lumen Technologies (NYSE:LUMN), another one of the year’s worst-performing stocks, down 58% in 2023 and 78% over the past 12 months. Moreover, in the past five years, shares are down 88%.
LUMN is now deep in penny stock territory as the telecommunications company’s situation has gone from bad to worse. The main problems facing the company are outdated technology and a mountain of debt. With debt of around $2o billion, Lumen has a debt-to-EBITDA ratio of 6.1, worse than 84% of its peers.
Lumen isn’t going down without a fight. The company is working to lower its debt level as it shifts from copper-wire-based services to newer fiber optic telecommunications equipment. Still, the task at hand looks daunting.
The company canceling its quarterly dividend payment was the last straw for many shareholders who moved to dump the stock once the dividend was eliminated. Given the continued decline in LUMN shares, investors would be smart to put it on their list of stocks to sell now.
3M (MMM)
Consumer goods company 3M (NYSE:MMM) is selling Post-it Notes in an age of generative artificial intelligence (AI). This helps to explain why the company’s share price has declined 21% in the past 12 months. In fact, MMM was the worst-performing stock in the Dow Jones Industrial Average in the first quarter.
The long-term performance of MMM stock is even worse, with a 47% drop in the past five years. While other products such as Scotch tape and scouring pads for cleaning dishes continue to sell reasonably well, the company’s portfolio is looking a little too analog to investors and analysts.
Management announced a restructuring plan at the end of April that includes reducing headcount, streamlining operations, simplifying supply chains, and focusing more on medical and dental products and less on consumer and office items. In time, the turnaround may work. But, more immediately, MMM stock continues to trend lower.
The company also recently fired a senior executive for inappropriate conduct and faces lawsuits over allegations it has polluted the environment with its chemicals. It’s time to sell.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
