October got off to an encouraging start, but it didn't take long for the markets to start selling off. Stocks still generally closed out the week higher. The "three stocks to avoid" in my column last week that I thought were going to lose to the market -- Apple (AAPL +2.65%), Conagra Brands (CAG +1.09%), and Gold Fields (GFI +5.98%) -- rose 1.3%%, 0.7%, and 5.9%, respectively, averaging out to a 2.6% uptick.
The S&P 500 experienced a 1.5% move lower, better than two of the three stocks but still short of the overall return. I was wrong. I have, though, been right in 32 of the past 51 weeks, or 63% of the time.
Now let's look at the week ahead. I see Walgreens Boots Alliance (WBA +0.00%), Blue Apron (APRN +0.00%), and, again, Gold Fields as stocks you might want to consider steering clear of this week. Let's go over my near-term concerns with all three investments.
Image source: Getty Images.
1. Walgreens Boots Alliance
It isn't easy being a drugstore operator these days. New platforms are upending and undercutting the way we fulfill prescriptions. E-commerce and third-party delivery apps are eating away at the need to drive to a drugstore for stocked essentials. It's against this grim backdrop that Walgreens Boots Alliance will step up to deliver financial results this week for the quarter that ended in August.
On the surface it may seem insane to bet against Walgreens Boots Alliance at this point. The stock hit a new 10-year low on Friday, and it's now trading for just five times trailing earnings. The stock is yielding a record high of 6.2%. This could make it a magnet for income-chasing value investors, but you may want to wait until it announces its quarterly results this week. Analysts see revenue and earnings per share declining 6% and 34%, respectively.
Analysts see revenue recovering next year, but Wall Street's eyeing just 1% growth. The bottom line is expected to keep shrinking, and it's easy to see why. This is a highly leveraged company. Having more than $38 billion in debt is a bad look heading into a time where refinancing rates are skyrocketing. Walgreens Boots Alliance may seem like a smart idea at five times trailing earnings, but would you say the same if I told you that it's fetching seven times forward earnings? The fundamentals are going to the wrong way.
NASDAQ: WBA
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2. Blue Apron
One of last week's biggest losers was Blue Apron. The pioneer of home-delivered meal kits shed more than half of its value, down 56% after announcing a stock offering. You may not think announcing a modest $15 million at-the-market equity offering would would result in the shedding of more than $100 million in market cap, but think about it. If the news sank the stock and Blue Apron went on with the offering anyway, it's a sign of how desperate it has become for liquidity.
There's a lot going wrong here. Growth is a missing ingredient, as revenue has failed to top a 2% year-over-year gain in each of the last four years. Losses are mounting, and Blue Apron has posted a larger deficit than analysts were expecting in at least the last four quarters. With too many competitors promoting aggressively to win their way into your kitchen, this is not going to be moneymaker for investors in the near term.
NASDAQ: APRN
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3. Gold Fields
I went with Gold Fields last week because I felt gold miners would slip if the market bounced back in October. I got the second part right. Stocks did bounce back. Unfortunately for this particular call, gold prices moved even higher. It also only helped Gold Fields that it would schedule a shareholder meeting to vote on a pending deal for a Canadian gold miner that was initially valued at $6.7 billion.
Gold isn't an inverse market fund. It may be a flight to safety when there's turmoil, but the shiny previous metal has still lost value this year. I still think investors will rotate out of gold if this early October rally continues into the new trading week.
NYSE: GFI
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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 Walgreens, Blue Apron, and Gold Fields this week.
