In last week's article on three stocks to avoid, I predicted that Royal Caribbean (RCL 0.54%), AMC Entertainment Holdings (AMC), and Osprey Bitcoin Trust (OBTC 0.38%) would have a rough few days.
- Royal Caribbean sank 5% for the week. The cruising industry is getting mixed signals on its attempt to resume sailings this summer, and Royal Caribbean itself didn't help its chances by having to cancel four weeks of voyages on a ship it was hoping to start using next month when eight crew members tested positive for the COVID-19 virus.
- AMC closed out the week with a 20% gain. This is the third week in a row that the stock moves higher on this list of weekly stocks to avoid. Bad news for the bulls: I am not including it in this week's list.
- Finally we have Osprey Bitcoin Trust slipping 2%. The crypto market continues to correct, and it's been a rough past few weeks for investors and speculators in the next-gen digital currencies.
All but one of the stocks moved lower, but AMC's pop was a crystal-ball killer. The three stocks averaged a 4.3% increase for the week. The S&P 500 took a 1.9% hit in that time, so I lost. Right now, I see Royal Caribbean, Steelcase (SCS -1.49%), and Osprey Bitcoin Trust as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Image source: Getty Images.
1. Royal Caribbean
Things were so rosy for Royal Caribbean heading out of 2019. The market darling among cruise lines was fetching an enterprise value of $38.9 billion after a record year of net income and revenue. No one knew that the COVID-19 crisis would suspend operations for more than a year, tarnishing the industry's safety reputation after fatal outbreaks aboard some ships.
We're getting closer to a return to sailing, but it's going to be with limited fleets and short leashes. It will take years for Royal Caribbean and its peers to regain the momentum that they've squandered. Despite the headwinds, Royal Caribbean's enterprise value begins this week at $38.6 billion -- and a week ago it was more than where it was at the end of 2019. Royal Caribbean is my favorite of the three cruise line stocks, but right now a recovery has been discounted at a time when the industry is fumbling its long overdue restart.
2. Steelcase
The pandemic was rough on the commercial furniture market. With folks working from home, there wasn't a need to flesh out corporate work spaces. Some folks investing in building out their home offices helped offset some of the sting, but that opportunity has already played itself out.
Revenue declined 13% at Steelcase in the fiscal year ending in February. This week Steelcase will be one of the few companies reporting fresh financials. Analysts see a narrowing deficit on a 5% increase in top-line growth off of naturally depressed results from a year earlier. Steelcase has surprised investors by beating Wall Street profit targets in each of the pandemic's four quarters, but I see this as a market that will take a lot longer to bounce back than other segments. The gradual return to the office isn't going to make a working space makeover a high priority. I am not expecting a positive quarterly reports financial results on Thursday morning.
3. Osprey Bitcoin Trust
I don't mind having a small percentage of my portfolio in crypto, but not every investment vehicle pegged to Bitcoin (BTC 0.15%) is the same. Osprey Bitcoin Trust is a recent entry into the market, offering a low-cost exchange-traded way to gain exposure to Bitcoin.
The rub here is that Osprey Bitcoin Trust trades at a big premium to its underlying assets. The trust closed at $15.20 on Friday, a 26% premium to the $12.03 a share in Bitcoin as its lone asset. The premium has widened from 12% to 18% to now 26% in the past two weeks. This doesn't make sense, especially when the much larger alternative -- Grayscale Bitcoin Trust (GBTC 1.23%) -- is fetching a 14% discount to its net asset value?
If you're looking for safe stocks, you aren't likely to find them in Royal Caribbean, AMC Entertainment, and Osprey Bitcoin Trust this week.
