I've been picking stocks to avoid every week, identifying names that I feel could be challenged in the coming days. My three stocks to avoid last week were on the move -- down 28%, down 23%, and up 5% -- averaging out to an 18.7% decline.
The S&P 500 rose 1.3% for the week, so I was the relative winner with my bearish calls. This week I see Digital World Acquisition Corp. (DWAC +0.00%), Activision Blizzard (ATVI +0.00%), and Robinhood Markets (HOOD 4.61%) as vulnerable investments in the near term. Here's why I think these are three stocks to avoid this week.
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Digital World Acquisition
My best call last week was for Digital World Acquisition to take a hit after soaring the week before. The special purpose acquisition company -- SPAC for short -- took off after partnering with Trump Media & Technology Group for the launch of the Truth Social platform.
It wasn't a political call. I've seen too many SPAC deals surge after announcing a dance partner, only to slide once reality kicks in. Like most SPACs, Digital World Acquisition has a little less than $10 a share in cash, and hot acquisitions often require additional dilutive financing to SPAC investors.
The stock took a 28% hit last week. I don't tend to repeat a bearish pick after a hefty tumble, but Digital World Acquisition is still trading for more than four times its cash with terms of the potential pairing still murky to say the least.
Activision Blizzard
One would think the popularity of video games is booming in the pandemic. If we're spending more time at home streaming, aren't we also playing Call of Duty and World of Warcraft? Activision Blizzard isn't living up to its end of the bargain. The stock is trading closer to its 52-week low than its 52-week high, and it's heading to a tricky quarterly report on Tuesday afternoon.
Activision Blizzard had an October that offered more tricks than treats. It had to fire nearly two dozen employees following harassment allegations, hit the brakes on planning next year's BlizzCon online event, and roll out an anti-cheat mechanism to remedy Call of Duty flaws.
Activision Blizzard is having a rough year. Analysts see revenue climbing shy of 5% in 2021, and it has posted double-digit top-line growth just once over the past five years.
Robinhood Markets
Last week was rough for Robinhood Markets. The next-gen online trading platform became a broken IPO after positing disappointing quarterly results. Robinhood experienced a problematic sequential dip in funded accounts, suggesting that traders are moving on to more flexible platforms.
Robinhood has talked about wanting to ramp up its offerings. It has crypto wallets in the works, and it also promises that account transfers and IRA accounts are on its near-term product roadmap. It will continue to shed customer counts until it becomes a more full-featured trading platform.
If you're looking for safe stocks, you aren't likely to find them in Digital World Acquisition, Activision Blizzard, and Robinhood Markets this week.
