Editor’s Note: Back in June, I wrote about three stocks that looked like real stinkers in Adam O’Dell’s Green Zone Power Ratings system.
Along with my original research below, you’ll find a section showing how these stocks performed since then — and how they rate now.
I wanted to feature this piece to show you why we turn to Adam’s incredible system every day. Get ready for more in 2024…
— Chad Stone, managing editor, Money & Markets
In the stock market, there are winners and losers. Big gains and even bigger pains.
If every investment was a surefire way to increase your wealth (as much as we’d all love that), it simply wouldn’t work. There are only so many dollars to go around.
That’s why, when I learned that our chief investment strategist, Adam O’Dell, had created a Blacklist chock full of stocks that don’t deserve a spot in your portfolio right now, I couldn’t wait to dive in.
Adam’s Blacklist is based on his Green Zone Power Ratings system, and it contains almost 2,000 companies that rate either “Bearish” or “High-Risk” — aka 40 or below on a 100-point scale.
These are all stocks that are expected to vastly underperform the broader market. And many of them are held, directly or indirectly, by millions of investors.
Being an investor myself, I immediately started digging through the list to find potential money-losing Blacklist stocks. (If you’d like to see how you can do the same, click here.)
And I found three companies that surprised me, to say the least.
An Ice-Cold Cooler Stock
Let’s start with YETI Holdings Inc. (NYSE: YETI)…
I’ll be frank, I love YETI’s products. I don’t own one of its flagship coolers (yet), but I don’t leave the house without my 24-ounce water bottle with its clever, leak-proof cap. And its coffee tumbler is critical for my morning commute.
I used to scoff a bit at the price of some of these items. But after owning them for years and seeing how they last through multiple camping excursions and trips through the dishwasher, I’m sold.
But Green Zone Power Ratings shows YETI stock is one to avoid:
YETI’s Green Zone Power Ratings in June 2023.
YETI stock scores a “Bearish” 35 out of 100, which means it’s set to underperform the broader market over the next 12 months.
While it sports strong ratings on Quality and Growth, its price-based factors (Momentum, Size and Volatility) all rate in the 40s or lower.
It lacks the positive price movement we like to see before buying a stock. YETI is down 11% this year, while the broader S&P 500 has gained 13%.
Rough Road Ahead
Moving on to another stock that I was surprised to see…
A few weeks ago, I wrote about how O’Reilly Automotive Inc. (NYSE: ORLY) was a “Strong Bullish” way to play the summer travel season.
That’s why I was a little shocked that Advance Auto Parts Inc. (NYSE: AAP) rates a “High-Risk” 20 out of 100 in Green Zone Power Ratings.
AAP’s Green Zone Power Ratings in June 2023.
After a little digging, I found out why. AAP’s latest earnings report was about as bad as it gets.
It reported adjusted earnings per share of $0.72, well below Wall Street’s estimate of $2.65. That’s partly why it scores a 33 on Adam’s Growth factor.
AAP leadership also slashed its full-year guidance and cut its quarterly dividend from $1.50 per share to $0.25!
All of this spells trouble ahead… But it’s far from the only auto stock facing hard times.
A Stubborn EV Maker
With the advent of a potential bull market driven by tech stocks, I was curious about one market sector that’s garnering a lot of hype: electric vehicles (EVs).
I’m not here to blast the EV mega trend. I’m not blind… Here in South Florida, it seems like 1 in 10 cars is a Tesla. And when my 2007 Honda Fit finally kicks the bucket, hybrids and EVs are going to be at the top of my wish list.
But there are some dogs to avoid in the EV market segment when you look at their Green Zone Power Ratings.
Case in point: Lucid Group Inc. (Nasdaq: LCID).
LCID’s Green Zone Power Ratings in June 2023.
At 0 out of 100, LCID is one of the worst-rated stocks in Adam’s system.
The stock has lost 67% of its value in the last year, explaining its 9 Momentum score.
LCID reported a net loss of $779.5 million in the first quarter, which won’t help its score of 4 on Growth.
And while this isn’t quantified in Green Zone Power Ratings, Lucid’s CEO Peter Rawlinson is not on board with joining Tesla’s Supercharger network alongside GM, Ford and Rivian.
He wants to focus on higher-voltage efficient charging as a way to future-proof EV charging technology… But will LCID even survive long enough to reap the rewards?
I can’t say, but I know now that Lucid is one stock to avoid.
These are just three stocks on Adam’s brand-new “Blacklist.” There are more than 1,900 others, and you can find out how to access it here.
And Adam is going to update this list every week so that you know what to avoid as the market evolves.
On top of the worst stocks to avoid, you’ll also gain access to Adam’s highest-conviction Green Zone Fortunes stock recommendations. Because there are plenty of stocks that are crushing the broader market, and he wants to help you avoid the worst and invest in the best.
End-of-Year Update
How did these three stocks fare since I wrote about them in June?
Green Zone Power Ratings was right on the money with two of these tickers, and an interesting phenomenon happened with the third…
- Advance Auto Parts Inc. (NYSE: AAP): Since June 23, AAP shares have sunk more than 7%. And the stock rates even worse at a 12 out of 100.
- Lucid Group Inc. (Nasdaq: LCID): Shares of the struggling EV maker are a full 21% lower than June levels. Slightly improved Growth and Value metrics have boosted LCID up to a 1 out of 100 overall rating, but it’s clear Adam’s system knew this was a bad stock to buy.
- YETI Holdings Inc. (NYSE: YETI): I hinted at YETI’s strong Growth and Quality factor ratings back in June, and it looks like investors are catching on. A stellar earnings report in August triggered a wave of new capital into the stock. Now, shares are 44% higher, and YETI’s Green Zone Power Ratings have improved to a “Neutral” 59 out of 100. This stock is now off the Blacklist, and I could see its rating improving even more from here.
For comparison, the S&P 500 is up 9%, the Nasdaq has gained 13% and the Dow is up 11% over that same time frame. So you can see how following Green Zone Power Ratings can lead to some incredible outperformance against the broader market.
And we can’t wait to find more stocks like these in 2024…
Until next time,
Chad Stone
Managing Editor, Money & Markets