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4 Toxic Stocks That May Stress You Out Amid Market Turmoil
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Wall Street has witnessed severe volatility so far this year, thanks to the Russia-Ukraine war, Fed’s ultra-hawkish stance and inflationary concerns. The S&P 500 and Nasdaq recorded the sixth consecutive day of declines yesterday. The FOMC Minutes from September's meeting were released yesterday.It was noted that inflation was declining slower than expected and the pressure is expected to persist in the near term. The minutes also suggested that the Fed is likely to keep to its pace of 75 basis points at the next meeting in November. Investors are getting increasingly worried as aggressive rate hikes could push the economy into a recession.
Amid such turbulent times, it is just as important to get rid of fundamentally weak toxic stocks as it is to invest in fundamentally strong companies. Toxic companies are usually characterized by huge debt loads and are vulnerable to external shocks. If you want to protect your portfolio’s health, make sure to identify such toxic stocks and dump them right away. MGM Resorts International (MGM - Free Report) , Tandem Diabetes Care, Inc. (TNDM - Free Report) , AngioDynamics Inc. (ANGO - Free Report) and Las Vegas Sands (LVS - Free Report) are a few such toxic stocks.
Investing in a stock whose current price is not rationally justified by its true potential is sure to result in loss over time. Identifying such bloated stocks accurately and discarding them at the right time can protect your portfolio. Overpricing of these toxic stocks can be attributed to either an irrational exuberance associated with them or some serious drawbacks. And if you own such stocks for an inordinate period of time, you are likely to see a significant erosion of your wealth. Selling such toxic stocks can provide some protection to your portfolio health as the market mayhem is likely to continue.
Screening Criteria
Here is a winning strategy that will help you to identify overpriced toxic stocks:
Most recent Debt/Equity Ratio greater than the median industry average: High debt/equity ratio implies high leverage. High leverage indicates a huge level of repayment that the company has to make in connection with the debt amount.
P/E using 12-month forward EPS estimate greater than 50: A very high forward P/E implies that a stock is highly overvalued.
% Change in F (1) and F (2) Estimate (12 Weeks) less than -5: Negative EPS estimate revision for this fiscal year and the next during the past 12 weeks points to analysts’ pessimism.
Here are four of the 22 toxic stocks that showed up on the screen:
MGM Resorts: Based in Las Vegas, NV, MGM Resorts is a holding company and primarily owns and operates casino resorts through wholly-owned subsidiaries. Notwithstanding the easing of certain COVID-19 protective measures, subdued foot traffic is hurting the company’s performance. The Zacks Consensus Estimate for MGM’s 2022 bottom line is pegged at a loss of 3 cents a share, having deteriorated from earnings of 4 cents a share over the last seven days. The stock currently carries a Zacks Rank #5 (Strong Sell).
Tandem Diabetes: Headquartered in California, TNDM designs, develops and markets products for people with insulin-dependent diabetes. The company’s business is being hurt by heavy dependence on the sales of insulin pumps and escalating operating expenses. The Zacks Consensus Estimate for TNDM’s 2022 bottom line implies a year-over-year plunge of 196%. The consensus mark for 2022 loss per share has widened 2 cents over the past 60 days. Tandem Diabetes currently carries a Zacks Rank #5 and has a VGM Score of F.
AngioDynamics: Headquartered in Latham, ANGO designs, manufactures and sells a wide range of medical, surgical and diagnostic devices. AngioDynamics’ operation in a strict regulatory setting and stiff competitive space are worrying. Pricing pressure and forex woes prevail. The Zacks Consensus Estimate for AngioDynamic’s current fiscal year earnings estimates have moved south by 2 cents a share over the past seven days. The stock currently carries a Zacks Rank #4 (Sell) and has a VGM Score of C.
Las Vegas Sands: Based in Las Vegas, LVS is an international developer of multi-use integrated resorts, primarily operating in the United States and Asia. Although casinos in Macao are now open, visitation is still very low in comparison to the pre-pandemic level. This along with high debt levels remains a concern to tide over the ongoing crisis. The Zacks Consensus Estimate for LVS’ 2022 loss is pegged at $1.10 a share, having widened from 89 cents over the past 90 days. The stock currently carries a Zacks Rank #4 and has a VGM Score of F.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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4 Toxic Stocks That May Stress You Out Amid Market Turmoil
Wall Street has witnessed severe volatility so far this year, thanks to the Russia-Ukraine war, Fed’s ultra-hawkish stance and inflationary concerns. The S&P 500 and Nasdaq recorded the sixth consecutive day of declines yesterday. The FOMC Minutes from September's meeting were released yesterday.It was noted that inflation was declining slower than expected and the pressure is expected to persist in the near term. The minutes also suggested that the Fed is likely to keep to its pace of 75 basis points at the next meeting in November. Investors are getting increasingly worried as aggressive rate hikes could push the economy into a recession.
Amid such turbulent times, it is just as important to get rid of fundamentally weak toxic stocks as it is to invest in fundamentally strong companies. Toxic companies are usually characterized by huge debt loads and are vulnerable to external shocks. If you want to protect your portfolio’s health, make sure to identify such toxic stocks and dump them right away. MGM Resorts International (MGM - Free Report) , Tandem Diabetes Care, Inc. (TNDM - Free Report) , AngioDynamics Inc. (ANGO - Free Report) and Las Vegas Sands (LVS - Free Report) are a few such toxic stocks.
Investing in a stock whose current price is not rationally justified by its true potential is sure to result in loss over time. Identifying such bloated stocks accurately and discarding them at the right time can protect your portfolio. Overpricing of these toxic stocks can be attributed to either an irrational exuberance associated with them or some serious drawbacks. And if you own such stocks for an inordinate period of time, you are likely to see a significant erosion of your wealth. Selling such toxic stocks can provide some protection to your portfolio health as the market mayhem is likely to continue.
Screening Criteria
Here is a winning strategy that will help you to identify overpriced toxic stocks:
Most recent Debt/Equity Ratio greater than the median industry average: High debt/equity ratio implies high leverage. High leverage indicates a huge level of repayment that the company has to make in connection with the debt amount.
P/E using 12-month forward EPS estimate greater than 50: A very high forward P/E implies that a stock is highly overvalued.
% Change in F (1) and F (2) Estimate (12 Weeks) less than -5: Negative EPS estimate revision for this fiscal year and the next during the past 12 weeks points to analysts’ pessimism.
Zacks Rank more than #3 (Hold): We have not considered Buy/Hold-rated stocks that generally outperform or are in line with the market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Say No to These Stocks
Here are four of the 22 toxic stocks that showed up on the screen:
MGM Resorts: Based in Las Vegas, NV, MGM Resorts is a holding company and primarily owns and operates casino resorts through wholly-owned subsidiaries. Notwithstanding the easing of certain COVID-19 protective measures, subdued foot traffic is hurting the company’s performance. The Zacks Consensus Estimate for MGM’s 2022 bottom line is pegged at a loss of 3 cents a share, having deteriorated from earnings of 4 cents a share over the last seven days. The stock currently carries a Zacks Rank #5 (Strong Sell).
Tandem Diabetes: Headquartered in California, TNDM designs, develops and markets products for people with insulin-dependent diabetes. The company’s business is being hurt by heavy dependence on the sales of insulin pumps and escalating operating expenses. The Zacks Consensus Estimate for TNDM’s 2022 bottom line implies a year-over-year plunge of 196%. The consensus mark for 2022 loss per share has widened 2 cents over the past 60 days. Tandem Diabetes currently carries a Zacks Rank #5 and has a VGM Score of F.
AngioDynamics: Headquartered in Latham, ANGO designs, manufactures and sells a wide range of medical, surgical and diagnostic devices. AngioDynamics’ operation in a strict regulatory setting and stiff competitive space are worrying. Pricing pressure and forex woes prevail. The Zacks Consensus Estimate for AngioDynamic’s current fiscal year earnings estimates have moved south by 2 cents a share over the past seven days. The stock currently carries a Zacks Rank #4 (Sell) and has a VGM Score of C.
Las Vegas Sands: Based in Las Vegas, LVS is an international developer of multi-use integrated resorts, primarily operating in the United States and Asia. Although casinos in Macao are now open, visitation is still very low in comparison to the pre-pandemic level. This along with high debt levels remains a concern to tide over the ongoing crisis. The Zacks Consensus Estimate for LVS’ 2022 loss is pegged at $1.10 a share, having widened from 89 cents over the past 90 days. The stock currently carries a Zacks Rank #4 and has a VGM Score of F.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.