- Blink Charging declined nearly 11% on the week.
- Cedar Fair came through with a well-received quarterly report. Shares of the regional amusement park operator moved 8% higher last week.
- Sundial Growers was the biggest loser of the three stocks to avoid. The speculative cannabis specialist saw its stock plummet 26% for the week.
The three stocks averaged a 9.7% decline for the week. The S&P 500's 0.7% dip was considerably better than blended return of the three stocks. I got it right this week. This week, I see Churchill Capital IV (CCIV), Osprey Bitcoin Trust (OBTC -3.46%), and Alteryx (AYX -5.39%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Churchill Capital IV
There's been a lot of love for special-purpose acquisition companies, or SPACs, these days. These blank-check companies are moving higher sometimes just on the speculative whiff of a potential acquisition. Churchill Capital IV has been putting the pedal to the metal in recent weeks on rumors that it's close to announcing a combination with Lucid Motors, an upstart electric-vehicle maker that's hoping to make its mark at the high end of the booming market.
There's a lot to like when it comes to Lucid Motors. It's the brainchild of a former Tesla engineer, and its first Lucid Air model is already taking presale reservations. The problem here is mathematical.
Churchill Capital IV has a little less than $10 a share in cash. The stock is trading more than five times higher than that. If Churchill Capital IV has to line up more financing, it will probably come from private investment in public equity (PIPE) firms that will want in closer to $10 a share for a 10-figure investment. Dealmakers are currently valuing Lucid Motors between $12 billion and $20 billion. Why would it take less than $0.20 on the dollar? Why would it want to leave money on the table that was made by speculators who have been bidding the stock higher? Why doesn't Lucid Motors just go public on its own? You can argue that Churchill Capital IV isn't going to buy all of Lucid Motors with its modest nest egg, but good luck telling investors that. Bulls don't want to hear that Churchill Capital IV can only afford a small piece of Lucid Motors despite a market cap that is five times higher than the money it can play with in this deal?
Churchill Capital IV may spike higher when the deal is complete, but there could also be some heavy selling on the news once investors realize the dilutive nature of this deal. It's Lucid Motors and not Churchill Capital IV that has the leverage here.
Osprey Bitcoin Trust
Osprey Bitcoin Trust certainly knows how to make an entrance. There aren't a lot of ways for investors to buy into Bitcoin (BTC 1.21%) through brokerage accounts, and this trust timed its entry into the market just as cryptocurrency was spiraling earlier this month.
I'm bullish on Bitcoin. My concern here is the value of what Osprey Bitcoin Trust investors are getting. Osprey is trying to stand out with its low 0.49% annual fee, a quarter of what the much larger Grayscale Bitcoin Trust (GBTC 0.98%) is charging. The problem is that when it hit the market it was valued at roughly three times the Bitcoin assets it was holding. Fellow Fool Dan Caplinger spotted this early:
Crypto investors: Paying three times what something is worth to save $0.24 per share in fees is almost the definition of pennywise and pound-foolish. Only invest if you are an accredited investor and can get in at NAV. $obtc— Dan Caplinger (@DanCaplinger) February 16, 2021
I regret not hopping on this disparity sooner. The market woke up to the madness on Friday, sending the shares 41% lower even as Bitcoin tokens were soaring. The problem is that Osprey Bitcoin Trust is still trading at an unsustainable premium. Osprey Bitcoin Trust closed out last week at $24.50, a nearly 30% premium to its net asset value of $18.88. Grayscale Bitcoin Trust commanded a more reasonable 8% premium to its Bitcoin tokens when the market closed on Friday.
Osprey Bitcoin Trust will be a compelling opportunity when the premium narrows dramatically, and it may keep moving higher alongside the Bitcoin rally. However, with the number of crypto-related investments increasing and the ability to buy Bitcoin tokens directly getting easier easier you'll want to avoid this name until its markup slips to a single-digit premium.
Things haven't gone according to plan for the cloud-based provider of analytics and automation solutions. The stock tanked this month after posting disappointing financial results. Revenue rose a mere 3%, sharply decelerating from the 76% top-line surge it posted for the same quarter a year earlier.
Investors have flocked to cloud-based stocks, but they're clearly not the same. Alteryx also disappointed when it comes to guidance, expecting a mere 13% increase for all of 2021. Bulls will argue that the numbers don't tell the whole story. New accounting rules are blurring the reality of cloud sales. Annual recurring revenue rose at a respectable 32% in the fourth quarter.
Adding insult to injury, Chief Revenue Officer Dean Darwin resigned late last week, after Alteryx became aware of a social media post that was not consistent with the software company's values. Darwin had landed the new role just last month. The incident obviously isn't as problematic as its slowing growth, but it just goes to show that when it rains it pours.
If you're looking for safe stocks, you aren't likely to find them in Churchill Capital IV, Osprey Bitcoin Trust, and Alteryx 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.