I took a look at three stocks to avoid last week, and two of them moved sharply lower. One investment rose 1% for the week, but the other two declined 11% and 12%. None of the three stocks kept up with the market's 2% advance, a return well ahead of the average decline of 7% for my bear basket.
It's a new week, and I see Live Nation (LYV 0.86%), Eastman Kodak (KODK 4.02%), and Kandi Technologies (KNDI 2.23%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
One of this week's more problematic earnings reports will come from Live Nation. The concert promoter is in a bind these days, and that's not breaking news. The pandemic has called off live music shows and other performances, so of course Live Nation is going to be in a world of hurt.
Analysts predict a sharp loss on a brutal 92% plunge in revenue for the second quarter, which Live Nation will discuss shortly after Wednesday's market close. No one is holding out for a strong report, yet somehow the stock has more than doubled off its mid-March post-pandemic low. The future isn't promising. Live shows are going to be slow to return, and even with a vaccine there will be general skittishness and social distancing norms that will take a long time to shake.
I love a good comeback story as much as the next hopeless romantic, but there's a good reason why Kodak's stellar rise last week turned heads. The stock was a 10-bagger -- yes, a 10-bagger -- over the course of last week's five trading days after the former camera pioneer was awarded a government loan for $765 million to help producing generic drug ingredients.
There's no denying that this is a favorable development for Kodak. It has seen its revenue decline for 15 consecutive years, rarely squeezing out an annual operating profit along along the way. Anything that gives it a fighting chance is worth celebrating. However, grabbing a government loan under the Defense Production Act to dabble in a cutthroat industry with razor-thin margins doesn't seem like a recipe for a 10-bagger here. Kodak should be worth more than it was a week ago, but speculators ran wild with the thin float here. This rarely ends well.
Another one of last week's short-lived winners was Kandi Technologies, a small Chinese maker of entry-level electric sedans that's hoping to make a splash in the stateside market. The stock had nearly quadrupled for the week at its intraday high on Thursday before giving back the lion's share of those gains. The stock still almost doubled for the week.
I was burned by Kandi years ago. I owned it. I also recommended it. Kandi had gotten its start as a small seller of ATVs and go-karts, but it briefly pinged on growth radars a half-dozen years ago when it teamed up with Geely Automobile Holdings on a car-building joint venture. It worked with Chinese municipalities to open garages filled with its battery-powered vehicles to rent by the hour. Kandi's ambitions expanded into the retail market, and that leads us to last Wednesday's investor-tickling announcement that it would host a virtual launch event on Aug. 18.
Kandi will start taking pre-orders for two models of its small electric cars available in the U.S. market for delivery later this year. The price points are compelling, starting at $19,999 before incentives. However, it's also worth noting that the compact entry-level model has just 100 miles of range on a charge and a top speed of 63 miles per hour. The $29,999 model has 188 miles of range and can go 70 miles per hour, but it's still going to be an uphill climb for Kandi.
The low-end buyers in the electric car market don't typically have reliable access to charging stations. It's also hard for any new brand to get established without a strong localized dealership and repair presence. Kandi deserves to be watched, but the barriers for success will be high.
If you're looking for safe stocks, you aren't likely to find them in Live Nation, Kodak, or Kandi this week.