I took a look at three stocks to avoid last week, predicting that Airbnb (ABNB 2.18%), Moderna (MRNA 0.63%), and Cintas (CTAS 0.82%) as vulnerable investments were going to have a challenging week. I fell short of the mark.
- Airbnb slipped 2% for the week. After back-to-back week of market-thumping gains the next-gen hospitality player proved mortal.
- Shares of Moderna plunged 12% during the holiday-shortened trading week. Moderna's vaccine was finally approved, giving investors that "sell on the news" moment. It probably didn't help that some of the COVID-19 vaccine recipients for both approved solutions have come down with allergic reactions.
- Cintas investors experienced a nearly 5% dip. The workforce identity specialist failed to impress the market despite posting better-than-expected quarterly results.
The three stocks averaged a 6% decline, with all three entires losing to the market. The S&P 500 surrendered just 0.2% of its value in that time. For this week, I see Nikola (NKLA -7.98%), Airbnb, Lemonade (LMND 1.08%), and Chuy's (CHUY 0.60%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
It's been four weeks since Nikola last graced this list of stocks to avoid, and it continues to plummet. Nearly everything that can go wrong for Nikola this year has gone south for the aspiring maker of big-ticket electric vehicles.
Its founder-CEO stepped down under a cloud of fraud allegations. Deals that helped propel the shares higher this summer have come undone. The stock that traded as high as $93.99 six months ago has been whittled down to $13.75. I normally don't like to pick on a stock after it's been hammered this far down, but we're also heading into the final trading week of 2020. A lot of folks still holding on to Nikola have probably realized some big gains elsewhere this year, and they may as well go for a bit of tax-loss harvesting by cutting Nikola loose in 2020.
One of my favorite IPOs of this year is Lemonade. The next-gen provider of property and more recently pet insurance services is doing a lot of neat things in an industry ripe for disruption. Its platform leans on artificial intelligence to provide quotes and in some cases process claims without the human hassle. Lemonade's mostly young audience will graduate from renters to homeowners where the policies are substantially larger.
Lemonade's been on fire lately, but that also makes it vulnerable this week. The shares have now more than quadrupled since going public this summer. This holiday-shortened trading week isn't likely to be as sleepy as it has been historically given all of the moving parts as 2020 comes to a close. It's going to be a volatile finish to the year, and some of this year's hottest IPO stocks could take a step back before getting back on track in 2021.
There were nearly 1,300 exchange-listed stocks hitting fresh 52-week highs last week. Chuy's was one of the more surprising names on that list. Don't get me wrong. I'm a fan of Chuy's take on Tex-Mex. I'd dip everything I eat in Chuy's creamy jalapeno or deluxe tomatillo sauces if I could.
The problem is that Chuy's is a chain that is best experienced on site. You're not going to be able to enjoy the Happy Hour nachos bar out of the trunk of a car at home. Your GrubHub driver isn't going to keep coming back to refill your basket of chips the way your server would at a physical Chuy's location. Eating inside one of the chain's 92 dining rooms is a challenge, and that's a big reason why comps declined nearly 20% in its latest quarter.
Chuy's has done an admirable job of cutting costs and adapting, but why did the stock hit new 52-week high on Friday when it's not the same business it was a year ago before the COVID-19 calamity? I don't think the new highs have been earned in this case.
If you're looking for safe stocks, you aren't likely to find them in Nikola, Lemonade, and Chuy's this week.