3 Stocks to Dump Before the Next Market Downturn

Stocks to sell

Many prominent Wall Street analysts and well-regarded economists are predicting a potential market downturn, or even a crash, this year. Observers say this is particularly likely if the economy falls into a recession, as some people continue to expect.

While these dire forecasts seem unlikely in the near term, one never knows. Equity markets can change quickly and stocks can decline sharply with little warning. It was only last summer that the market experienced its most recent correction, with the benchmark S&P 500 index dropping more than 10% before rallying in late October through the end of the year.

With the prospect of a market correction ever present, it is prudent for investors to regularly review their portfolio and get rid of underperformers. Jettisoning poor performing stocks before a broader market decline is always advisable. Here are three stocks to dump before the next market downturn.

Warner Bros. Discovery (WBD)

A close-up of the blue and yellow Warner Bros (WBD) sign.

Source: Ingus Kruklitis / Shutterstock.com

Warner Bros. Discovery (NASDAQ:WBD) laid an egg with its latest earnings, sending its stock down 10% as a result. The entertainment company reported a bigger-than-expected loss for the fourth quarter of 2023. Warner Bros announced a loss of 16 cents a share compared to a loss of 7 cents that was expected by Wall Street. Revenue also disappointed, totaling $10.28 billion — below forecasts of $10.35 billion. Revenue was down 17% from a year earlier. That was largely due to a 14% decline in the company’s linear television advertising revenue.

Warner Bros. Discovery did its best to put a positive spin on the results, playing up the fact that it generated $3.31 billion in free cash flow during the quarter. Management also emphasized that their flagship subscription streaming service, Max, ended 2023 profitable for the first time with full-year earnings of $103 million. But investors were having none of it and quickly hit the “sell” button on WBD stock. Most concerning to the long-term outlook for Warner Bros is the $44.20 billion of debt that the company is saddled with. WBD stock is down 45% in the last 12 months.

Rivian Automotive (RIVN)

Rivian (RIVN) All Electric R1T Pickup Truck in a forest green color

Source: Roschetzky Photography / Shutterstock.com

Storm clouds continue to gather over Rivian Automotive (NASDAQ:RIVN). The electric vehicle maker just reported earnings that missed analysts’ forecasts across the board. The struggling EV maker announced a Q4 2023 loss of $1.58 a share on revenue of $1.30 billion. The top and bottom-line numbers fell short of Wall Street expectations that had called for a loss of $1.35 per share and revenue of $1.32 billion. Analysts and investors were quick to condemn the company’s print. RIVN stock has dropped 38% since the company’s latest earnings were made public.

Like Warner Bros. Discovery, Rivian did its best to spin, or at least downplay the poor results, announcing that it plans to cut 10% of its salaried workforce. Rivian currently has 16,700 total employees. It’s not known exactly how many are salaried workers and will be targeted in the upcoming layoffs. Rivian also stressed that it delivered 50,122 vehicles last year, up from 20,332 in 2022. However, for this year, the company is guiding for 57,000 EV sales. Wall Street was looking for sales of 66,000 vehicles in 2024. RIVN stock is down 42% in the past year and down 93% since its 2021 market debut.

Boeing Co. (BA)

Image of Boeing (BA) airplane in a hanger.

Source: Alex JW Robinson / Shutterstock.com

Aircraft manufacturer Boeing (NYSE:BA) is trying to get its house in order after a panel blew off one of its jets mid-flight at the start of the year. Most recently, the company announced that it is replacing the head of its troubled 737 Max program. The 737 program’s current head, Ed Clark, is leaving the company altogether. He is being replaced by Katie Ringgold, a company insider, who will become the president of the struggling 737 Max line. At the same time, Boeing named Elizabeth Lund to the new position of Senior Vice President of Quality for the commercial airplane unit.

The executive shuffle comes after a Jan. 5 accident aboard an Alaska Airlines flight caused a new crisis of confidence at Boeing. The recent blown off panel is the latest in a series of quality problems on Boeing aircraft that have delayed deliveries to customers and hurt the company’s earnings. The commercial airplane maker has been struggling to recover since fatal crashes of its Boeing 737 Max 8 aircraft in 2018 and 2019 killed 346 people. The company now faces increased scrutiny and restrictions from federal regulators, not to mention growing skepticism from investors.

BA stock is down 20% so far this year, and trading 54% lower than where it was five years ago, making it a stock to dump before the next market downturn.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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