Choosing the right stocks can help you grow your wealth, but holding onto the wrong ones can be a costly mistake. Some stocks don’t just underperform—they can drain your portfolio and erase your hard-earned gains faster than you realize.
The reality is, many investors overlook the warning signs, and by the time you hear about the risks, it’s often too late. Some of these problematic stocks might even be popular names, regularly making headlines for all the wrong reasons.
We’ve put together a list of stocks that we believe you should consider selling or avoiding right now. If any of these are in your portfolio, it might be time to rethink your position before they start dragging you down.
Viking Therapeutics (VKTX): A Sell in the Face of Heightened Competition
Viking Therapeutics has had a standout year in biotech, thanks to impressive mid-stage results for its weight loss candidate VK2735. The stock has seen significant gains, though it has recently pulled back sharply, dropping more than 10% in one session and 24% over the past month. The cause? Mounting competition in the weight loss drug market—specifically from industry heavyweight Merck.
Merck’s recent announcement of a $112 million licensing deal with Hansoh Pharma to develop an oral GLP-1 weight loss candidate signals the company’s serious intent to enter this lucrative market. While Merck’s candidate, HS-10535, is still in pre-clinical testing, the mere prospect of such a formidable competitor has rattled Viking’s shareholders.
Although Viking’s VK2735 remains ahead in clinical development, its dominance is now uncertain as more established players with deeper resources, like Merck, move into the space. This competition increases the risk for investors at a time when the weight loss market is already heating up with high-profile drugs from Eli Lilly and Novo Nordisk.
The company’s other programs, including VK2809 for liver disease, have shown promise, but the long timelines, costly clinical trials, and the potential for setbacks create additional uncertainty.
While Viking Therapeutics has shown strong innovation and potential, the recent selloff underscores the risks of investing in a mid-cap biotech facing intensifying competition. For investors seeking stability or less speculative growth, Viking Therapeutics may be a stock to avoid for now.
Quantum Computing (QUBT): A Stock to Avoid Amid the Hype
Quantum Computing (QUBT) has captured investor attention with its meteoric rise—up about 2,400% in just three months—fueled by growing excitement around artificial intelligence (AI) and quantum computing. But beneath the buzz lies a company with a questionable history, limited revenue, and a valuation that raises more red flags than confidence. Here’s why investors might want to steer clear of this speculative play.
Quantum Computing, the company, has undergone several pivots since its founding in 2001, starting as a seller of inkjet cartridges, shifting to beverages, and now claiming a place in the quantum computing space. This pattern of reinvention, coupled with past business failures and legal troubles, raises concerns about the company’s long-term strategy and credibility. Its recent rebranding to Quantum Computing feels reminiscent of gimmicky moves like Long Island Iced Tea’s infamous pivot to blockchain—a rebrand that capitalized on hype without substantial business fundamentals.
Even if we set aside its murky history, Quantum Computing’s financials tell a concerning story. The company generated only $386,000 in trailing 12-month revenue, giving it a staggering price-to-sales ratio of about 5,400. For comparison, even some of the most well-established, high-growth tech stocks rarely sustain P/S multiples above 50. With minimal revenue and significant costs associated with developing quantum computing systems, the company is likely to continue burning cash for the foreseeable future.
To fund its operations, Quantum Computing has already raised $14.6 million through secondary offerings in the first three quarters of 2024. With its stock price surging, management may be tempted to raise more capital through additional offerings, diluting existing shareholders and potentially putting downward pressure on the stock.
The speculative nature of this company, combined with its outsized valuation and history of pivots, makes it a risky bet. While quantum computing has vast potential, investors should look for more established players in the field rather than chasing a company with minimal revenue and questionable fundamentals. For those considering QUBT, the risks far outweigh the rewards at this point.
Kraft Heinz (KHC): A High Yield with Hidden Risks
At first glance, Kraft Heinz’s 5.2% dividend yield might seem appealing, especially compared to the consumer staples sector’s average of 2.5%. But a closer look reveals that this high yield comes with significant risks, particularly as the company’s much-touted turnaround plans for 2024 fell short of expectations.
The struggles at Kraft Heinz are not new. Since the 2015 merger of Kraft and Heinz—spearheaded by 3G Capital with financial backing from Warren Buffett’s Berkshire Hathaway—the company has faced ongoing challenges. The initial cost-cutting strategy boosted profitability in the short term, but it quickly became apparent that Kraft Heinz couldn’t cut its way to sustained growth. Over the years, leadership changes and the eventual exit of 3G Capital in 2023 highlighted the company’s inability to execute effectively.
In 2024, Kraft Heinz set modest goals, aiming for organic sales growth of 0% to 2%. Instead, the company posted declines in every quarter, with organic sales dropping 0.5% in Q1, 2.4% in Q2, and 2.2% in Q3. Even more troubling, its “Accelerate” businesses—supposedly the focus of its turnaround efforts—performed even worse, with a steep 4.5% decline in Q3.
While other companies like Unilever have successfully implemented similar strategies, Kraft Heinz has failed to demonstrate meaningful progress. Unilever, for instance, achieved 4.5% sales growth in Q3 2024, a stark contrast to Kraft Heinz’s ongoing struggles. This poor execution has left the stock underperforming its peers, with little to suggest a near-term improvement.
Although the company owns a portfolio of well-known brands and is investing in rebuilding its marketing and innovation capabilities, these efforts will take time to yield results. For now, the stock’s high yield is a reflection of its challenges rather than a reward for strong performance.
Investors looking for stability or growth in the consumer staples sector should steer clear of Kraft Heinz until the company shows concrete signs of reversing its downward trajectory. For now, this high-yield stock remains a risky bet.