It's fitting that this weekly column should land on Halloween. The market gave us treats through most of October. I was looking for trick. The "three stocks to avoid" in my column last week that I thought were going to lose to the market -- Amazon.com (AMZN -1.65%), AbbVie (ABBV -0.30%), and Overstock.com (BYON -5.06%) -- plummeted 13.3%, sank 0.3%, and rose 0.8%, respectively, averaging out to a 4.3% decline.
The S&P 500 experienced a 4% move higher. I was correct. I have been right in 35 of the past 54 weeks, or 65% of the time.
Now let's look at the week ahead. I see Cinemark Holdings (CNK -1.30%), CVS Health (CVS -0.65%), and Noodles & Co. (NDLS 8.08%) 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. Cinemark Holdings
It was a rough summer at the local multiplex. The peak theater season that kicked off with bang sputtered shortly after third quarter began. Cinemark Holdings reports on Friday morning. I guess you can say it will be themed to the horror flicks that tend to come out this time of year.
Cinemark is losing money, and projections for a return to profitability have been pared back sharply in recent months. Cinemark has also posted a larger-than-expected loss in its two previous reports, and that's when box office tallies were more encouraging. Big movies are finally coming, but will an optimistic outlook be undone by a brutal third quarter?
Making matters more buttered-popcorn slippery, Cinemark is a highly leveraged company with nearly $4 billion in debt. Its enterprise value is more than three times its market cap, and that's not a good look with interest rates rising. We've already seen its top rival have to pay up with its latest refinancing move at a yield to maturity approaching 15%. Another rival filing for bankruptcy reorganization is more of an omen than an opportunity, especially if the number of available screens begin to contract for studios pondering whether or not to give multiplex operators exclusive release windows in the future.
2. CVS Health
Remember when folks were heading out to their local drugstores for COVID-19-tackling vaccinations, picking up a few extra items along the way? We're at a different time now. When CVS Health reports on Thursday it's likely to be unimpressive. Analysts see revenue and earnings per share climbing a mere 4% and 1%, respectively.
The headwinds are there for an industry in an era when healthcare reform and cheaper prescriptions are on the rise. We're heading into the time of year when folks line up for flu shots, but will things really improve over last year's traffic levels? The surge in popularity of third-party delivery apps could also eat into walk-in traffic for folks just picking up some household essentials. I don't see a bombshell in this report, and some investors view CVS Health as a recession-resistant investment. I'm not convinced. If the market keeps heading higher into November I can see CVS as a laggard instead of a leader.
3. Noodles & Co.
Some of the leading restaurants that reported earnings last week had encouraging reports, but Noodles & Co. doesn't enter into earnings season with the same kind of momentum. The fast casual concept has been a market laggard, and it has missed Wall Street's profit targets in two of the last three -- and four of the last six -- quarters.
The concept's noodles-centric menu isn't fading in popularity. The average unit is selling quite a bit more than it did before the pandemic. Unfortunately margins have been taking a hit as the costs to operate a restaurant including labor and food inflation continue to rise.
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 Cinemark, CVS Health, and Noodles & Co. this week.
