MENU

5 stocks I would AVOID at all costs

Credit: Alex Proimos

Popular online stock forum HotCopper Holdings Ltd (ASX: HOT) boasts 700,000 unique users per month. Personally, I find it a fascinating source of diverse opinions and a useful gauge of sentiment among retail shareholders (or “punters” if you prefer).

As you would expect from such a broad member base, the quality of comments varies hugely. Whilst there exists a minority of well informed and insightful contributors who are well worth seeking out, the clear majority of posts are of little value.

Indeed, having spent far too much time browsing the site I have noticed that there appears to be a strong negative correlation between the most talked about stocks and those that I would consider to be worthy of investment. For example, here are today’s top five talked about shares.

SKY and Space Global Ltd (ASX: SAS)

Market capitalisation: $303.4 million (note that Google Finance shows a market capitalisation of $113.1 million but this excludes 880,000,000 shares held in escrow)

First half 2017 revenue: $24,400

First half 2017 loss after tax: $4.7 million

Cash: $5.4 million

Sky and Space “plans to plans to deploy nano-satellites constellations in orbit to provide global communication infrastructure and services to the telecommunications and international transport industries.”

This is a heady goal which probably explains why the share price is up 975% in the last six months.

XPED Ltd (ASX: XPE)

Market capitalisation: $46.5 million (Google Finance shows $36 million but this excludes 497.1 million shares in escrow)

First half 2017 revenue: $0.6 million

First half 2017 loss after tax: $3.9 million

Cash: $5.5 million

Xped “has developed revolutionary and patent-protected technology that allows any consumer, regardless of their technical capability, to connect, monitor and control devices and appliances found in our everyday environment.”

Sounds like amazing technology, and a market capitalisation of just $46.5 million means this must be a bargain (not).

Slater & Gordon Limited (ASX: SGH)

Market capitalisation: $30.3 million

First half 2017 revenue: $322.7 million

First half 2017 loss after tax: $425.1 million

Cash: $57 million ($737.4 million of debt)

This legal firm makes no money and has borrowed more than it is ever likely to be able to repay in its current form. What is such a company worth?

Mustang Resources Limited (ASX: MUS)

Market capitalisation: $39.3 million

2016 revenue: $0

2016 loss after tax: $10.3 million

Cash: $0.7 million

Mustang Resources “is an emerging gemstone developer and producer focused on the near-term development of the highly prospective Montepuez Ruby Project in northern Mozambique.”

Hmmm… a mining explorer with no money, BUT the shares are up 234.6% in the last three months!

Greenpower Energy Limited (ASX: GPP)

Market capitalisation: $35.7 million

First half 2017 revenue: $15,000

First half 2017 loss after tax: $0.6 million

Cash: $2.8 million

Greenpower is developing technology to convert coal to liquid which will “produce greenhouse-gas free chemicals and products from coal”. However, in the first half of 2017 the company also acquired a part interest in a Guyanese lithium exploration project.

Wow, turning coal into liquid sounds awesome and everyone knows lithium is a great investment right now. No wonder the share price is up 600% in the last six months.

Foolish takeaway

All five of Hotcopper’s most talked about stocks lose money and that does not look like changing any time soon.

They also all have limited funding so dilution of shareholder funds looks like a given in the near-term. These are precisely the qualities to avoid when looking for a company to invest in.

Just because these are the most talked about stocks does not necessarily mean they represent the investing decisions of the typical Hotcopper user. It could be that these stocks are widely discussed because they attract both critics and advocates. Also, they probably say more about the relatively small number of people who post prolifically on the site, rather than the average forum member.

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often full franked..

But knowing which blue chips to buy, and when, can often be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Matt Brazier has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.