I've been picking stocks to avoid every week, and last week I didn't do so well. My three stocks to avoid last week were all over the place -- flat, soaring 23%, and climbing 8% -- averaging out to a 10.3% increase.
The S&P 500 rose a mere 0.5% for the week, so I lost badly to the market. Still, I have come out ahead in 10 of the past 14 weeks. Let's see if I can bounce back. This week I see Bed Bath & Beyond (BBBY -15.86%), Robinhood Markets (HOOD 2.75%), and American Airlines Group (AAL 1.11%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
Bed Bath & Beyond
One would think a superstore chain selling housewares would be booming through the pandemic. We're spending a lot of time at home, and sprucing up our digs has helped boost the prospects of many companies providing home goods that are going through more wear and tear than in the pre-COVID-19 days.
Bed Bath & Beyond didn't get the memo. Revenue has fallen for three consecutive fiscal years. It has fallen short of Wall Street's profit targets in two of the past three quarters, and that's important since the struggling retailer is one of the few companies reporting financial results this week.
Bed Bath & Beyond announces its fiscal-second quarter results on Wednesday morning. Momentum and recent history suggest it won't be very impressive.
Stocks I own personally aren't immune to making the cut on this list, and that brings us to Robinhood Markets. The next-gen trading exchange that ushered in the era of commission-free trading is coming off a great quarter of growth, but the current quarter that ends later this week will be a different story.
Robinhood's second quarter was strong this summer, as revenue soared 131%. The rub is that stock trading revenue actually declined and now accounts for less than 10% of the top-line mix. Robinhood is leaning on options and crypto trading for its revenue -- and that's problematic. Even more problematic is that Dogecoin (DOGE -1.51%) was the most popular trade on Robinhood in the second quarter, and volume on that crypto has fallen by roughly 75% this quarter. There are also more places for folks to trade Dogecoin now.
Robinhood's announcement last week that it's launching crypto wallets should help wean the platform off of meme crypto like Dogecoin. Fundamentals-driver crytpo traders will take Robinhood more seriously when they know that they can take their more conventional investments off the platform. However, the current quarter will still be sequential letdown, and with the stock still trading above its July IPO price, there's always the incentive for the more than 300,000 Robinhood traders that got in on the stock at the ground floor to take their profits.
One of the stocks that didn't go my way last week was American Airlines. Shares of the legacy carrier rose 8% for the week on mixed news. The good news is that the U.S. cleared the way for vaccinated European visitors to travel to the country, even if it remains risky given the large number of breakthrough COVID-19 cases in the U.S. these days. The bad news is that the Department of Justice is looking into the potentially anticompetitive nature of the alliance between American Airlines and JetBlue (JBLU 1.41%).
Given the sorry state of the airline industry these days, it may be hard to bust up a partnership of two profitless players as being anticompetitive in nature. The bigger problem for American is that it's still a lumbering legacy carrier in an industry that's facing waning demand from corporate and to a lesser extent leisure travel.
If you're looking for safe stocks, you aren't likely to find them in Bed Bath & Beyond, Robinhood Markets, and American Airlines this week.