My "three stocks to avoid" column last week went according to plan. The three stocks I thought were going to move lower for the week -- Micron Technology, Bed Bath & Beyond, and National Beverage -- finished down 8%, down 33%, and up 2%, respectively, averaging out to a 13% decline.
The S&P 500 experienced a 2.2% slide, and the investments I figured would fare worse fell a lot more on average. I was right. I have been correct in 25 of the past 37 weeks.
Where do I go to next? I see Coinbase (COIN -2.88%), H&R Block (HRB 2.57%), and WD-40 (WDFC 0.93%) as stocks you may want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
This is a challenging time for crypto platforms. We've already seen a couple of major players freeze withdrawals as they try to stave off bankruptcy. The bullish argument for Coinbase is that as the cash-rich leader, it would be the last one to buckle. It could also pick up some of the business from traders burned on lesser platforms.
However, Coinbase was already reeling before its rivals started to crater. Retail trading volume experienced a 58% sequential decline in this year's first quarter, and the second quarter probably only got worse. Confidence is understandably rattled in the crypto community. Coinbase was smart enough to not take the kind of risks that faltering platforms took on, but the global appetite for digital currencies is going to take some time to come back.
There's also something that Coinbase bulls aren't considering. Coinbase has locked up the Ethereum (ETH 1.11%) of many of its customers who agreed to stake on the platform until it completes its migration to a proof-of-stake model. The migration has been delayed, and Coinbase has also moved the goalposts on an alternative exit strategy that it was hoping to initially have in place before the end of last year. Ethereum has plummeted 71% this year. Am I the only one who sees a problem there?
Only a handful of stocks have moved sharply higher this year that aren't energy stocks. H&R Block is one of them, up 59% so far in 2022. There aren't any near-term negative catalysts for H&R Block, and the tax-prep giant boosted its guidance in its latest quarter.
However, the long-term outlook remains stormy for H&R Block as we shift to a simplified tax code. Right now, I'm singling out one of this year's biggest gainers because I think the market will rotate out of the top stars of the first half of 2022. I could've picked one of the big energy names, but I figured it would be more original if I knocked the Block.
One would think that this economic climate is fertile soil for WD-40. Its namesake lubricant as well as its wide line of maintenance, home care, and cleaning products hit the sweet spot of today's vibe. We're not splurging as much as we were a year ago, and that means making sure the stuff we do have is well maintained.
The problem with WD-40 is that it hasn't been faring as well as you might think. Inflationary pressures have crushed its gross margin. Three months ago it hosed down its guidance for this year. On Thursday afternoon, it steps up again to provide its latest quarterly results. How did the past three months fare? Did price increases find customers turning to cheaper off-brand alternatives? Is WD-40 still struggling to boost its mark-ups back to historical levels? There are a lot of question marks for a company that isn't cheap by most measuring sticks relative to its slow growth.
It's going to be a bumpy road for some of these investments. If you're looking for safe stocks, you aren't likely to find them in Coinbase, H&R Block, and WD-40 this week.