Last week was a step up investors long the market. The "three stocks to avoid" in my column that I thought were going to lose to the market last week -- Best Buy (BBY 0.02%), Luckin Coffee (LKNC.Y +0.49%), and Apple (AAPL 2.15%) -- rose 13%, slipped 2%, and fell 12%, respectively, averaging out to a modest 0.3% dip.
The S&P 500 experienced a 1.5% move higher. I was right. I have been correct in 37 of the past 58 weeks, or 64% of the time.
Now let's look at the week ahead. I see Big Lots (BIG +0.00%), Baozun (BZUN +0.41%), and Coinbase (COIN +1.20%) 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. Big Lots
Some retailers seem poised to thrive in an economic downturn, and Big Lots, in theory, would be one of them. The deep discounter of third-party overstock and clearance items should be recession resistant. When folks aren't spending money through traditional retail outlets, it gives Big Lots more merchandise to stock on better terms. Consumers also will trade down to get more bang out of their bucks.
Reality, though, has offered a wake-up call. Big Lots has been a dud. It has grown its sales by more than 2% just once over the past decade. Things have been even worse lately. When Big Lots offers up its fiscal third-quarter results on Thursday morning analysts see it checking in with its sixth consecutive quarter of year-over-year declines in sales.
Making matters worse, Big Lots is a heavily leveraged retailer with more than $2 billion in long-term debt on its balance sheet. Interest rates are rising, and that will make life harder for Big Lots.
NYSE: BIG
Key Data Points
2. Baozun
Chinese stocks are generally out of favor, but some models are more susceptible than others. Baozun arms its clients with e-commerce tools to reach out digitally to Chinese audiences. It was once attractive to global brands seeking a mindshare slice of the world's most populous nation. But it finds itself in a different world these days.
China's tightening of its restrictive policies finds overseas companies taking a step back in the country, and that's bad news for Baozun. We've seen revenue decelerate sharply in recent years.
- 2019: 35%.
- 2020: 22%.
- 2021: 6%.
This year is off to a challenging start. Its top line declined by 2% in the first quarter and 8% in the second quarter. Pandemic-related lockdowns in some parts of the country have weighed on results, but brands outside of China are generally hesitant to invest in the volatile market. We'll get a fresh read on Baozun when it reports financials before Tuesday's market open. With iffy business dynamics and Baozun falling short of Wall Street profit targets in three of the past four quarters, it's easy, and probably wise, to brace for a disappointing report.
NASDAQ: BZUN
Key Data Points
3. Coinbase
There will eventually be a bounce in Coinbase shares. The leading crypto exchange has a strong balance sheet, and it's built to outlast its risk-taking peers that are paying the price for their lavish offerings.
The rub is that as its rivals buckle, distrust grows in the crypto community. Coinbase already has its back against the wall. Revenue has plummeted sharply for the last three consecutive quarters. Digital currencies failed to recover when stocks began to bounce back. Coinbase stock hit an all-time low last week, but that doesn't mean it has bottomed out.
NASDAQ: COIN
Key Data Points
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 Big Lots, Baozun, and Coinbase this week.
