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Stocks  | January 29, 2021

My impression is that there is a general unease in the markets. Investors are growing anxious although broad market indicators like the S&P 500, up 3.82% since the beginning of 2021, continue to progress. The voices that quietly speculated about valuations in mid-to-late 2020 seem to be growing louder, prompting some to ponder which stocks to sell.

The same tech and EV plays that were so popular and provided handsome returns to investors will face increasing scrutiny. It is going to be much harder for pretenders to the throne to skate by on weaker fundamentals in 2021 than in 2020. 

That’s why investors should take a hard look at their respective holdings currently. Steer clear of these weaker players:

  • Canoo (NASDAQ:GOEV)
  • QuantumScape (NYSE:QS)
  • Sundial Growers (NASDAQ:SNDL)
  • Ideanomics (NASDAQ:IDEX)
  • Nikola (NASDAQ:NKLA)
  • PlugPower (NASDAQ:PLUG)
  • Advanced Micro Devices (NASDAQ:AMD)

Stocks to Sell: Canoo (GOEV)

Recent news that Apple (NASDAQ:AAPL) held negotiations with Canoo last year to potentially buy its technology does a lot for Canoo. Investors are more than willing to gamble on unproven EV players on the scantest of information. So, when news is released that Apple considered buying Canoo, markets automatically connected the dots: if this company is worthy of Apple’s investment, it should be worth yours, right? Sure, if you’ve got free cash lying around like Apple. But in my opinion Canoo remains among enticing EV plays that will face much more scrutiny. Therefore, prices will be facing downward pressure. 

Further, its skateboard platform is the flattest battery module. It simply opens up many possibilities. I envision licensing of the tech as a potential future revenue stream. 

But, with those positives stated, I have to believe that GOEV stock is one to sell right now. The company is relying on the idea that it can finance its vehicles in a pay-as-you go format. The company is planning on offering a subscription service. Not a purchase, and not a lease, but rather the company will allow subscribers to rent a timeshare of the vehicle for terms as short as a month. Canoo claims this will increase their revenues by 4X. That’s great for the company, but the strategy seems feasible in densely populated areas only.

EVs are still in wild west mode so manufacturers should be thinking about sales and establishing footprint. Canoo production doesn’t begin until Q2 2022. I don’t think shares should rise now and this is one of the stocks to sell. 

QuantumScape (QS)

The rise of QuantumScape makes a lot of sense. The company touches on many investing trends. It’s SPAC funded, a play on EVs and it is disruptive in its technological offering. That’s the most important thing about it, really. The company is developing solid-state batteries that look to upend some of the pain points of EVs currently. Most importantly, solid-state batteries offer up to a 50% improvement in EV range. So, it’s easy for investors to see the attraction of this particular stock. 

But, while there are plenty of reasons to hold interest in the technology, there’s reason for investor skepticism as well. QuantumScape isn’t going to have a battery ready for commercial production until 2024. Significant sales aren’t anticipated until 2027.

But even if all goes according to plan, investors should be skeptical for another reason: viability. Company CEO Jagdeep Singh plainly admits that commercialization is very much not a foregone conclusion. QS stock should continue to experience selling pressure. 

Sundial Growers (SNDL)

Even though Sundial Growers might look good to retail investors based on price, it is one to avoid. Shares of SNDL stock can currently be had for much less than $1. That of course, is no reason to buy a stock absent of strong fundamentals. And that’s exactly the problem with SNDL, landing it on the list of stocks to sell. 

I recently wrote about why the company is in so much trouble and cautioned investors against investing in the company. Simply put, the management of Sundial Growers is operating the company poorly. The company currently finds itself in the unenviable position of rising losses, bad assets and a Nasdaq which has little reason to care about its shares while they remain under $1.

As I wrote a few days ago, “The problem is Sundial’s assets. The company’s financial statements show that it has a $65.7 million CAD of impaired assets in 2020. In 2019 it had $162,000 CAD worth. Impaired assets are those whose anticipated future cash flows are lower than their current carrying value. That’s like going to a job but having to pay your employer to work there.” 

Ideanomics (IDEX)

Ideanomics is a company that is a jack-of-all-trades, master of none, and yet hopes that investors will hand it investment dollars. Despite my skepticism, IDEX shares continue to rise. 

But I still believe this is one to sell right away.

The company itself is divided into two business divisions: Mobile Energy Global and Ideanomics Capital. The former focuses on providing EV fleet discounts along with financing and charging. The latter serves the fintech industry in name but results are less clear. 

The company has invested heavily into Solectrac, a California e-Tractor business, the mortgage and title industry, and several other avenues. My guess is as good as anyone’s reading this as to whether the company can do something in any of those respective niches. Surely there are business cases to be argued within all of them. Strong businesses exist in all niches. But the problem is that Ideanomics seems to be making multiple land grabs in disparate areas and hoping that one will suddenly take off. It makes little sense. 

In buying up all manner of companies Ideanomics actually managed to increase revenues. But being so diverse was an operational disaster. As a result, profits fell off a cliff. Through the first nine months of 2019, Ideanomics generated $43.286 million in profits. It generated $1.014 million through the same period in 2020. As a result, it is among my stocks to sell.

Nikola (NKLA)

Nikola remains among the greatest cautionary tales in the stock market for 2020. Right now NKLA stock sits at just over $20 per share. And although some investors bought it at much higher prices and have subsequently lost a lot of money, it remains one of the stocks to sell. 

The stock market is far from an objective, numbers-based game. It remains part art, part science. So sometimes valuations, being quite objective, simply don’t hold water for investors because numbers are only half of the equation. If you follow these numbers to their logical conclusion as InvestorPlace’s Mark Hake did, you see that Nikola is worth far less than its current share price. That should put downward pressure on its price. But it could simply be that Nikola has strong subjective catalysts that outweigh any objective ones. 

However, in Nikola’s case the subjective catalysts are also stark. The company lost credibility after a string of scandals. General Motors (NYSE:GM) also cut ties with the company after it had pledged to take an 11% stake in the company. NKLA stock is simply one to let go of in order to salvage any losses at this point.

Plug Power (PLUG)

Plug Power may very well turn out to be the best operator among hydrogen stocks in the future. It may also make a lot of money and handsome profits for investors. But I think that right now it is a smart idea to take some profits for owners of PLUG stock. 

The recent news that Plug Power partnered with South Korean conglomerate SK Group receiving $1.5 billion in investment is a win long-term for the company. Roughly a week after that announcement, Plug Power released news of an agreement with Renault. The two companies agreed to launch a joint venture in France in the first half of 2021 with the overarching goal of decarbonization in Europe. 

This is all positive news for the company. However, shares rose as a consequence, which is inevitably going to lead to greater scrutiny of Plug Power’s fundamentals. The future became brighter, but now the company has to prove its $66 share price. Shares may well dip despite the Biden administration being in office and all of the other positives. 

Advanced Micro Devices (AMD)

AMD was one of the biggest stories of 2020. Intel’s (NASDAQ:INTC) downfall was a big part of that narrative with all of the troubles that it experienced. AMD and Nvidia (NASDAQ:NVDA) capitalized on Intel’s inability to execute in bringing 7-nanometer chips to market. Intel delayed delivery to 2023 at that time and its rivals pushed ahead of it. 

I believe Intel is going to regain a portion of its dominance in the semiconductor market this year. The company is not as steadfastly against outsourcing as it had been in the past. It looks very likely that Intel’s 7 nanometer chip debacle will be sorted out to some degree.

I assume that the massive valuations afforded to AMD will decrease despite its strong business. Markets will reallocate some capital to Intel this year. AMD will remain strong, but it will suffer a market correction soon and is on the list of stocks to sell.  

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