2 TSX Stocks That Investors Are Better Off Not Buying in 2020

Here are the two TSX stocks that investors are better off not investing in during 2020.

| More on:

Successful stock market investing involves looking for right stocks to buy. However, what’s even more important is to know which stocks to avoid. The current economic scenario indicates that investors should stay away from stocks that are surrounded by uncertainties and have low liquidity. 

Here are the two TSX stocks that I would prefer to avoid in 2020.

Aurora Cannabis

The astounding growth in Aurora Cannabis (TSX:ACB)(NYSE:ACB) stock must have caught your attention. Shares of Aurora Cannabis have more than doubled in less than two months. The stellar growth in Aurora Cannabis stock reflects its strong Q3 performance and upbeat EBITDA outlook. 

The company’s revenues marked double-digit growth on a sequential and year-over-year basis. Besides, Aurora Cannabis managed to lower its cash costs and reduce its losses. The company is yet to report a positive EBITDA, but management expects that to change in the first quarter of fiscal 2021. Besides reporting strong quarterly numbers, consolidation of its stock was an encouraging move.

Despite the strong surge in its value, I have a negative outlook on the Aurora Cannabis stock, as one or two strong quarterly performance doesn’t indicate a turnaround in its fortune. Besides, my outlook for the cannabis industry is quite bearish. The long-term viability of the sector is under question, as the thriving black market, supply-chain issues, and lack of access to funding pose serious threats. Besides, the increase in the number of companies entering the pot market continues to squeeze margins by driving prices lower.

I believe the fundamental issues like the lack of liquidity and uncertainty over the legalization in several markets indicates that investors are better off buying cannabis stock in 2020. As for Aurora Cannabis, the surge in its stock price presents an excellent opportunity to book profits and make an exit.

Suncor Energy

Suncor Energy (TSX:SU)(NYSE:SU) is another stock which I would prefer to stay away from in 2020. Suncor looks tempting due to the sharp drop in its stock price. Shares of Suncor Energy have declined by about 42% so far this year. Besides, the company’s integrated business model mitigates some of the risks arising from volatility in oil prices. Also, liquidity is not a concern for Suncor Energy. 

However, there are too many uncertainties surrounding the oil and gas industry, which keeps me at bay. While the reopening of the economy ignites hopes of the recovery in oil prices, it is highly uncertain at what pace the recovery might come. Besides, Suncor expects crude oil prices to stay low in the next one to two years, reflecting demand-supply imbalance. Also, a lack of coordination among OPEC nations is a cause of concern for the industry.

Suncor announced about 55% cut in its dividend, suspended its share-buyback program, and plans to reduce its operating expenses by 10% year over year. Moreover, the company significantly lowered its capex guidance for 2020. While these steps are prudent to lower the cash breakeven price for Suncor, it isn’t good news for shareholders and indicates challenges ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sneha Nahata has no position in any of the stocks mentioned.

More on Cannabis Stocks

Cannabis business and marijuana industry concept as the shadow of a dollar sign on a group of leaves
Cannabis Stocks

Could the Cannabis Bubble Re-Inflate?

Let's dive into the question of whether the Canadian cannabis bubble can re-inflate from here.

Read more »

Cannabis business and marijuana industry concept as the shadow of a dollar sign on a group of leaves
Cannabis Stocks

Should You Buy Canopy Growth Stock or Green Thumb Stock Today?

Let's dive into two cannabis giants, and which one may be the better pick for long-term investors.

Read more »

Farmer smiles near cannabis crop
Cannabis Stocks

Could Aurora Cannabis Stock Finally Recover by Year-End?

Down 99% from all-time highs, Aurora Cannabis stock is focused on improving profit margins and expanding sales of its medical…

Read more »

Farmer smiles near cannabis crop
Cannabis Stocks

Are Pot Stocks About to Surge Again? 

With pot stocks making big moves of late, many investors are now asking whether the cannabis sector is worth investing…

Read more »

Farmer smiles near cannabis crop
Cannabis Stocks

Can Pot Stocks Aurora Cannabis and Canopy Growth Bounce Back in Q4?

Down over 99% from all-time highs, Canadian pot stocks such as Aurora Cannabis and Canopy Growth remain high-risk bets.

Read more »

Worker tags plants at an industrial cannabis operation
Cannabis Stocks

Can Canopy Growth Stock Finally Recover in 2024?

Down 98% from all-time highs, Canopy Growth remains a high-risk investment in 2024 given its weak fundamentals.

Read more »

Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Slow Burn: Is Aurora Cannabis Finally a Good Buy in June?

One of the benefits of choosing from some of the most beaten-down market segments like cannabis is that even a…

Read more »