3 very risky stocks that investors may want to avoid in 2024

By | December 22, 2023

A frustrated investor looking at multiple charts and reports.

A frustrated investor looking at multiple charts and reports.

Would you like to buy shares at a discount on the way to 2024? There are some good deals in the markets, but there are also some potentially dangerous and risky stocks that you might want to avoid right now. Three stock investors must be very careful with, among other things Altria Group (NYSE:MO), Plug-in power supply (NASDAQ: PLUG)And Canopy growth (NASDAQ: CGC). This is why you may want to think twice before adding these stocks to your portfolio.

1. Altria Group

Tobacco giant Altria faces an uncertain future. Cigarette smoking is declining and the company is trying to switch to less harmful products, but that is easier said than done. Over the past nine months, the company has generated $18.5 billion in revenue, of which $16.5 billion comes from its smoking products. That is almost 90% of turnover.

The bread and butter is based on an industry that is in decline. The company says year-to-date domestic cigarette shipment volumes are down 10.5%. While earnings won’t go to zero tomorrow, this is a major problem that Altria needs to solve before it can become a sustainable long-term investment.

While the stock looks cheap (it trades at less than nine times earnings), there is a good reason for the discount as the underlying business faces many question marks. And the high-yield 9.4% dividend may look attractive, but it also comes with a lot of uncertainty because if Altria struggles to grow, a dividend cut could be a possibility in the near future.

2. Connect the power supply

An even riskier stock than Altria is Plug Power. The green hydrogen company has recently raised business continuity issues, meaning it has no confidence in its own ability to survive. There aren’t many more serious red flags than those for investors. It is quoted at just 0.8 times book value and shares are down 64% this year, which may leave some investors feeling compelled to take a contrarian view on the stock.

But the risk is simply too great. The biggest problem with the company isn’t even that it has posted a $726 million loss over the last three quarters. More alarming is the $864 million in cash that has been used up during that period. The company can’t afford to keep up that pace because the company only had $111 million in cash and cash equivalents at the end of September; the risk of share dilution is high.

There isn’t much power left in Plug Power’s supply. And while energy has fallen this year, investors shouldn’t expect a major turnaround in 2024. Investing in green energy can be a good move, but not if a company does not have sufficiently strong financial resources to support its long-term growth.

3. Canopy growth

Another company that has raised continuity risks is Canadian cannabis producer Canopy Growth. The days when this was a promising growth stock are long gone. Instead, the company prides itself on becoming an asset-light company as it feverishly tries to cut back on whatever spending it can do to keep its operations afloat.

But that is no easy task. Recently, the sports nutrition company BioSteel divested, which was the fastest growing business unit. And on Monday it also announced the sale of its skincare and wellness brand This Works. However, whether that will be enough to stop the cash burn is uncertain. And at the very least, divesting assets will only cause revenue to continue to decline.

Canopy Growth’s net sales were just under C$70 million for the period ended September 30 and were down 21% year over year. Additionally, the company also burned through more than CA$66 million in cash from its day-to-day operations. Cash and short-term investments totaled CA$270 million at the end of September, so the company has some breathing room, but is still in a tough spot.

With the stock down 79%, investors should probably resist the temptation to take a chance on this very risky investment.

Should You Invest $1,000 in Altria Group Now?

Consider the following before purchasing shares in Altria Group:

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

3 Highly Risky Stocks Investors May Want to Avoid in 2024 Originally published by The Motley Fool

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