With just eight days to go before we turn the page on 2021, there's little question it'll go down as another successful year for the investing community. The benchmark S&P 500 was higher by 23% through this past weekend, while the aggregate value of cryptocurrencies has surged 185%.
While plenty of investors have reveled in big-time gains this year, 2022 could feature some of the top-performing investments coming back to Earth in a big way. The following five high-flying stocks and cryptocurrencies all stand to lose 50% or more of their value in the upcoming year.
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Shiba Inu
Within the cryptocurrency space, there's not a token I'd strongly urge investors to keep their distance from more than meme coin Shiba Inu (SHIB +2.74%).
The world's hottest cryptocurrency was practically unstoppable this year, with a jaw-dropping year-to-date gain of a little over 42,000,000%. Shiba Inu has benefited immensely from being listed on more crypto exchanges, the launch of decentralized exchange ShibaSwap in July, a massive coin burn (courtesy of Ethereum co-founder Vitalik Buterin), and the fear of missing out taking hold among investors.
But history is pretty clear that life-altering gains in the crypto space are met with equally epic reversions. Practically every gain of 24,000% or more I've come across in a short time frame has been met with a pullback ranging between 93% and 99%. We're liable to see a huge reversion after SHIB gained 42,000,000% in less than 12 months.
The bigger issue is that Shiba Inu offers no competitive advantages or differentiation, relative to other payment coins. Its holders might be good at stirring up hype on social media, but that's not going to coerce businesses to accept SHIB as a form of payment. With fewer than 390 merchants worldwide accepting SHIB, it has no business being valued near $17 billion.
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AMC Entertainment
If Shiba Inu is the most dangerous investment in the crypto space, movie theater chain AMC Entertainment (AMC +7.41%) is the unquestioned investment to avoid on Wall Street.
Through last weekend, AMC was the top-performing large-cap stock, with a year-to-date gain of 1,274%. These gains are primarily the result of an early year short squeeze that caught short sellers off-guard. Pessimists who were counting on an imminent bankruptcy were shocked to find that AMC was able to save itself by selling over 160 million shares of common stock and issuing high-interest debt. Like Shiba Inu, AMC has also benefited from an impassioned base of retail investors.
However, the company is a financial mess, and there's a very real possibility its shares could be worthless within the next few years. It's contending with $5.45 billion in debt (with an 8% average interest rate), over $5 billion in operating lease liabilities, and it's $376 million behind on its rent. Meanwhile, the company burned through $714.5 million in cash through the first nine months of 2021, and 10% of its liquidity disappeared in just one quarter (Q3 2021).
Beyond just the income statements and balance sheet signaling disaster ahead, AMC has lost its bargaining power with major studios as well. Whereas theatrical exclusivity was commonly 75 to 90 days prior to the pandemic, it's now typically just 45 days. This makes it even more difficult for AMC to get anywhere close to cash flow breakeven.
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Floki Inu
The theme to drive home for 2022 is to not chase Shiba Inu-themed cryptocurrencies that offer no competitive edge or differentiation. That's why Floki Inu (FLOKI +4.93%) is a good bet to lose 50% or more of its value next year.
Through late evening on Dec. 19, FLOKI was higher by about 2,400% for the year. Its investors have piled in every time Tesla Motors' CEO Elon Musk has tweeted about his recently adopted Shiba Inu dog (named Floki). They're apparently also excited about Floki Inu's numerous ongoing projects, including a non-fungible token (NFT) gaming metaverse known as Valhalla.
Unfortunately, Floki Inu's gains look to be built on nothing more than social media hype and misappropriated connections to Elon Musk. Although the project has partnered with Elon Musk's brother, Kimbal Musk, to address global hunger issues, the world's richest person has nothing to do with Floki Inu.
What's more, the vast majority of businesses want nothing to do with FLOKI, either. The whitepaper notes that a partnership with CryptoCart allows holders to use their FLOKI at approximately 1,700 retail stores. But there are more than 500 million entrepreneurs globally, which demonstrates how few merchants actually accept FLOKI as a form of payment. Without a path to widespread utility, Floki Inu should fade throughout 2022.
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GameStop
In mid-January, it was gaming and accessories retailer GameStop (GME +0.78%), not AMC, that was viewed as the beacon of hope for the retail investor movement. While 2022 won't be game over for GameStop, investors will likely have to hit the reset button on their proverbial consoles.
Like AMC, the key catalyst for GameStop was a short squeeze. GameStop's short interest was higher than all other publicly traded stocks in January, making it an easy target for optimistic retail investors. The monster rally in GameStop's shares (up 726% year to date) allowed management to sell stock and rid the company's balance sheet of any outstanding debt. Unlike AMC, GameStop is rocking a net cash position and has no concerns about insolvency.
But just because GameStop raised capital, it doesn't mean the company is in great shape. Management waited far too long to shift from a brick-and-mortar operating model to one that's focused on digital gaming. As a result, the company's physical store presence remains a drag, even as it shutters underperforming stores in an effort to cut costs.
Additionally, GameStop's revamped management team hasn't exactly laid out a turnaround plan that's inspiring Wall Street. With the company effectively mimicking its gaming rivals (albeit late to the party in doing so), it could be years before profitability and growth return.
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Dogecoin
Lastly, ultra-popular cryptocurrency Dogecoin (DOGE +3.77%) has all the hallmarks of an investment that could lose 50% or more of its value in 2022. And yes, this is another Shiba Inu-themed digital token.
Dogecoin has had a great year. Through this past weekend, it was higher by almost 3,400%. Its investors have clearly been excited about Elon Musk owning DOGE in his own portfolio, as well as the recent decision by Tesla to accept Dogecoin for select merchandise. Musk has also previously tweeted that he'd be working with Dogecoin's development team to improve the blockchain-based network.
Although Elon Musk has a knack for latching on to or leading successful projects, Dogecoin is not something investors should be excited about. It's a payment coin with markedly higher transaction fees and generally slower processing times than most popular payment tokens. We also witnessed the number of average daily transactions on its blockchain decline to a three-year low in September.
Like Shiba Inu and Floki Inu, Dogecoin offers minimal real-world payment utility and has nothing that resembles a competitive edge or lasting differentiation.
Hype always proves fleeting on Wall Street and even in the cryptocurrency space. That bodes poorly for all five of these investments in 2022.
