In last week's article on three stocks to avoid, I predicted that Delta Air Lines (DAL 3.74%), Blink Charging (BLNK 1.10%), and Osprey Bitcoin Trust (OBTC 2.40%) would have a rough few days.
- Delta Air Lines hit some turbulence, descending nearly 7% for the week. The air carrier didn't impress the market with its latest financial results, even if it was the first time in more than a year that it didn't post a larger loss than analysts were expecting.
- Blink Charging was the biggest sinker for the week, tumbling 14%. The electric charging kiosk specialist is one of the market's most overvalued stocks, and it didn't help that a larger rival fell even harder for the week after a poorly received secondary offering.
- Finally, Osprey Bitcoin declined 9% last week. The cryptocurrency trust was trading at a rich premium to its net assets, and it was a bad week of trading for digital currencies.
The three stocks averaged a 10% decline for the week. The S&P 500 moved 1% lower, so I won for the fourth week in a row. Right now, I see Kimberly-Clark (KMB 3.70%), Tootsie Roll (TR 2.27%), and Osprey Bitcoin Trust (OBTC 2.40%) 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. Kimberly-Clark
In a world of growth stocks with sky-high valuations I may seem nuts kicking off this list with a blue chip paper goods giant. Kimberly-Clark is also Dividend Aristocrat royalty, boosting its payouts 49 years in a row. It currently yielding a respectable 3.3%.
However, Kimberly-Clark is one of the hundreds of companies stepping up with quarterly results this week -- and it could be a problematic report. Kimberly-Clark has fallen short of Wall Street's profit targets in two of the past three quarters, and analyst estimates have been inching lower in recent months. Investors are bracing for a dip in earnings on a 4% year-over-year increase in revenue when it reports on Friday morning. The rub is that sooner or later we're going to admit that we overstocked on Kimberly-Clark's paper towels, disposable diapers, and tissue paper. The pandemic boost is over, and Kimberly-Clark is vulnerable.
2. Tootsie Roll
Another first-timer on this list is Tootsie Roll. The confectionary icon was one of the more unusual names to get caught in the meme stock craze earlier this year. Speculators gravitated to heavily shorted stocks, and the long-running dividend-paying Tootsie Roll went along for the ride.
The shine has come off many of the initial meme stocks now that fundamentals are having their say. Tootsie Roll's business has seen better days. Revenue has declined in five of the past six years, and even all of the consumer awareness that comes with being a meme stock didn't help turn sales positive in the first quarter of this year. It's expected to post another ho-hum quarterly result later this week.
3. Osprey Bitcoin Trust
I'm a long-term bull on Bitcoin (BTC 1.83%), but there's no reason to overpay for exposure to crypto these days. Osprey Bitcoin Trust is a low-cost exchange-traded trust that only owns Bitcoin tokens. The 0.49% annual expense ratio is lower than most crypto exchanges charge for a trade, and I'd be a bullish on Osprey if it traded at or ideally below its net asset value. Unfortunately that's not the case.
Osprey Bitcoin Trust was trading at a 33% premium a week ago, and last week's sell-off only improved the math to make it a 27% mark-up right now. Until the premiums narrows substantially nearly every other way to buy into Bitcoin is the smarter play.
If you're looking for safe stocks, you aren't likely to find them in Kimberly-Clark, Tootsie Roll, and Osprey Bitcoin Trust this week.
