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2 Stocks to Avoid at All Costs This Summer

No one likes to think about their stock is taking a literal turn for the worst. Sinking stocks are likely the furthest thing from your mind after you buy them, but it can be just as important (if not more so) when considering what to buy. Especially in this still-volatile market.

So, if you’re looking over your portfolio and wondering if you should switch things up, taking advantage of the downturn, there are a few stocks I would think twice about first. While it can be exciting to buy a stock when it’s down, hoping to see it rise, these two stocks might still have a few more months in the downward direction before investors see them rise — if at all.

Cameco

A few months back, I was singing a different tune when it came to Cameco (TSX:CCO)(NYSE:CCJ). The world’s largest uranium producer is setting itself up to be a big winner should uranium make a comeback, and, frankly, the mineral absolutely could. With more than 65 reactors around the world being built — 50 in China alone and plans for even more on the way — Cameco could one day be a bet you were glad you took.

But there’s that word, could. Right now, there are two problems uranium producers face. First of all, that the world is still not past the Fukushima disaster of 2011. This has created an oversupply in the market, making companies like Cameco wait around even longer before needing to build more supply.

Then there’s the trade war with China. China is hoping to move away from coal and towards uranium, but with current trade tensions, Cameco won’t be able to take advantage of that partnership. President Donald Trump has been asked by companies like Cameco not to impose new trade restrictions on imports of foreign products like uranium.

Now again, if you’re looking long term, Cameco has the potential to be the top dog of the uranium industry. But that could be years away. Right now, the stock is at a 52-week low at around $12 per share as of writing after reporting a net loss of $23 million in its latest quarterly report.

Vermilion

Last week, I discussed why Vermilion Energy (TSX:VET)(NYSE:VET) would best be left out of investors’ portfolios for now, despite the company’s amazing 12.26% dividend yield as of writing. Analysts have been lowering the stock’s target price, and on July 29, Vermilion’s fate was sealed.

The petroleum and natural gas producer had a power outage in a France refinery, which led to a second-quarter oil and gas decline. While production was offset by production in the United States and Australia, investors weren’t so happy with the results. Analysts expected this, hence the downgrade in stock price by 9%, resulting in a 7.6% share price drop once the news broke.

The news also has potential — and even current — investors wondering if the incredible dividend yield is safe. After all, the company has stated that the dividend yield is set up for when the company has shares closer in price to those of its well-performing peers. And if Canadian oil and gas prices remain so low, companies like Vermilion don’t really have a chance — in the short term, that is.

Vermilion could still turn around, but not until there is some upward momentum from the industry. As of now, it’s trading at a 52-week low of $22.51 as of writing. That’s a decrease of about 24%. Meanwhile, analysts have lowered the producer’s target price 18% to $33 per share. That’s still a great increase from where it is now, but it could take some time to get there.

Foolish takeaway

Both of these stocks do have the potential for some major gains in the long term. That makes now a good time to snatch them up; however, there are definitely a few things that have to happen for both stocks to perform. With trade tensions and gas prices the way they are, I would at least caution investors to wait until after the summer to re-evaluate these stocks.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.

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