Today, I’m bringing you a new list of toxic stocks that have no place in your portfolio. If things go wrong, these stocks are going to drop hard and wipe out a lot of value in your portfolio.
We’ve been identifying these all year long, and a lot of them have really crashed and burned, so I want to put you in a position to avoid those types of stocks.
First up is TaskUs, Inc. (TASK), which was a hot initial public offering (IPO) earlier this year that has doubled in price since June. They do outsourced digital customer experiences and are working primarily with companies that sell their products via apps.
They’re working on product launches, customer acquisition and all the things that drive a new campaign for a game or app. They do business with gaming, fintech, telehealth, rideshare and ecommerce companies and all the red-hot spots of the current technology markets.
These are the companies that everybody wants to own, and everybody wants to do business with. Well, TASK is doing business with them, but here’s the thing… Blackstone Inc. (BX) has sold all of their shares in this company along with the shares from the CEO and another executive during a secondary offering not too long ago.
They got completely out of TASK. And when you see a company like BX get all the way out of a company, that tells you they feel like they’ve gotten every last dime of value out of it. Now, the share unlock period is coming up.
Six months from the IPO, all the rest of the insiders can sell their shares without having to register a secondary stock offering. And 74% of the existing float, millions of shares, are going to become available for sale.
Insiders aren’t going to sell them all, but they’re going to sell a lot, as this is their first chance to cash in on stock holdings that have made them very rich but which they’ve been unable to access for a long time.
They can now access that cash by selling stock, and they’re going to do exactly that once they’re able to on Dec. 7. That selling is almost certainly going to push this stock a lot lower.
The valuation is very extended. The stock has doubled, but you’ve got 74% of the float coming available for sale. There’s going to be a lot of selling pressure and very few buyers around looking to buy a stock that a successful private equity firm like Blackstone has recently been selling.
TASK is not a stock you want in your portfolio because that unlock of those IPO shares is going to put a lot of weight on the stock in the weeks ahead.
Robinhood Markets, Inc.
Next up is Robinhood Markets, Inc. (HOOD), which is the online mobile brokerage app. I hate this company, and I’ve hated it right out of the gate.
They make most of their money from “payment for order flow” rather than actual commissions or fees or anything else. They are selling your order flow to other brokerage firms and hedge funds. You are not the customer when you use this app… You are the product at HOOD.
They have used their app to make trading and investing seem almost like a video game, and there have been some disastrous losses from people who got into leverage positions that had no idea how much risk they were taking.
Far from educating anybody, they make this all seem like a big fun exciting game, trying to suck in every possible dollar and encouraging speculative trading without teaching people exactly what risks they’re taking.
I hate the stock. I hate the company. I hate everything about it. But that’s not the reason I want you to avoid it. The stock is at 16 times sales right now, which is ridiculous for a brokerage firm. They’re going to have a huge problem if Gary Gensler follows through on his threat to ban or restrict payment for order flow.
That would ruin HOOD’s business. And the business is not even that great. If there’s a pullback in the market, that’s also going to be very destructive to the business.
They had a minor lockup of about 61 million shares, and several of the top executives were heavy sellers back in October. Well, on Dec. 1, there’s an even bigger unlock of 567 million shares owned by insiders, which will be able to be sold without filing a prospectus for a secondary offering.
They’ll have to disclose that they sold the stock, but they can just dump it on the market. And again, they’re going to! This is their first chance to monetize all of the gains they have in the company. They may keep some stock, but they’re going to sell a lot as well.
The business has been getting bad attention and publicity, the stock has been drifting lower and we’re going to see even more selling pressure on top of that existing negative bias. That combination is highly toxic, and I think we’re going to see the stock make an incredible run for the bottom.
Last up is another one that you simply cannot own. It’ll destroy your portfolio, and it’s everything bad about what we’ve seen in the special purpose acquisition company (SPAC) market over the last couple of years.
Momentus Inc. (MNTS) is a “space infrastructure” company. First off, I don’t think any of these hot little companies that came public through a SPAC deal recently are going to do much at all.
You’re really going to tell me that these little companies that raised a couple hundred million dollars are going to compete with Lockheed Martin Corporation (LMT) and The Boeing Company (BA) and the other leaders in this space? I don’t think so.
This company has been public for just a few months, and they’ve already had to settle a lawsuit based on fraud committed by one of the cofounders of the company. They had to buy him out for $40 million just to get the SEC off their back because of so many false claims they made about their space infrastructure.
They supposedly have water-based propulsion system that works wonderfully, and they’re going to send these vehicles up to maneuver satellites into the proper orbit and maintain them… Well, they did one test back in 2019, and it didn’t work.
I don’t know that they’re ever going to get a dollar of sales. They’re arguing with the government to get access to some technology that they need. But I don’t think they’re going to get it, as there’s no reason for the government to give them that information when it’s clear that their propulsion system doesn’t work anywhere near as well as they have told investors that it did.
There are no real revenues and no plans for revenues any time soon. The stock is trading at 1,700 times the little bit of revenue they do have coming in from interest. I don’t think this company has a future, and having it in your portfolio is going to be a toxic experience.
I highly recommend that you do not own shares of MNTS, as I think this space company is on a flight to nowhere.
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