I've been picking stocks to avoid every week, and I fared pretty well last time. My three stocks to avoid last week were on the move -- up 6%, up 4%, and down 2% -- averaging out to a 2.7% increase.
The S&P 500 rose 1.8% for the week, so I fell short on my bearish calls. Let's see if I can get back on track. This week I see Netflix (NFLX 1.51%), AT&T (T +0.25%), and Robinhood Markets (HOOD 6.42%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
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Netflix
I've been a Netflix shareholder for more than 19 years, and unfortunately I sold most of it way too soon. It remains my largest investment, and I'm more than a little nervous heading into the streaming-video tastemaker's telltale earnings report on Tuesday afternoon.
Expectations are high, with the stock hitting all-time highs earlier this month. It doesn't help that Netflix disappointed investors with its previous quarterly update three months ago.
I'm not selling my position in Netflix heading into the report. I've been burned for lightening my position in that stock too soon over the years. However, Netflix will have to deliver blowout results -- and an even rosier near-term outlook -- if it wants to build on its recent gains. Investors have already discounted the Squid Game phenomenon. What's next, Netflix?
AT&T
There are hundreds of companies reporting fresh financials this week, and one of the more problematic reports could be AT&T. The wireless carrier reports third-quarter results on Thursday morning.
A lot isn't going right for AT&T these days. It's in the process of spinning off its HBO-helmed entertainment business, and that transition could prove bumpy. Yield-chasing investors have already been warned that AT&T will soon be cutting its quarterly dividend rate.
This week's report won't be pretty. Revenue will decline for the fifth consecutive quarter. The promise of 5G connectivity to boost usage and rates hasn't panned out. AT&T's wireless business is facing competitive challenges, and its legacy business is fading away. It's dangerous to buy into AT&T until its spinoff is completed cleanly, the new dividend is settled, and organic revenue growth returns. Until we check off all three of those items, this is going to be a bad connection for investors.
Robinhood Markets
I had just one of the three stocks to avoid from last week decline, and that was Robinhood Markets. It's another stock I own -- like Netflix -- but I don't have the same long-term bullish enthusiasm for the online trading platform. Robinhood Markets stock slipped despite the surge in crypto last week.
Robinhood's dependence on payments for order flow is coming under regulatory fire. The Securities and Exchange Commission is also now allowing some early investors to sell a portion of their holdings. Robinhood relies on crypto and options trading -- not stocks -- for the lion's share of its business, making the shares even more speculative than you might think.
If you're looking for safe stocks, you aren't likely to find them in Fastenal, Renren, and Robinhood Markets this week.
