The coronavirus pandemic has been creating problems for many industries and companies. And until it subsides, some stocks are going to remain very risky buys. Knowing which stocks to steer clear of can be important, as it can help prevent you from incurring significant losses during this very volatile period. Below are two stocks that stand out as particularly high-risk investments that I wouldn’t consider investing in, at least until the pandemic is over.
I’m not a big fan of Bombardier (TSX:BBD.B) to begin with, but the pandemic should give you even more reason to avoid this stock. In February, the company announced it was exiting the rail business. Its decision to focus on business aviation can’t look more catastrophic, coming just weeks before the World Health Organization (WHO) would officially declare COVID-19 a pandemic, which would lead to significant shutdowns across the world and limited air travel.
Focusing on aviation amid the coronavirus pandemic could be what sinks Bombardier once and for all. The company posted a $1.8 billion loss last year, and it incurred a loss of at least $1 billion in four of the past six years. Meanwhile, it was struggling to grow its revenue, and selling off businesses to focus on aviation isn’t going to make investors any more optimistic about its future.
When the company released its second-quarter earnings on August 6, it opened by informing investors that it has plenty of liquidity on hand — not a good sign. While yes, it’s important to know that the company is able to survive right now, it doesn’t paint a pretty picture of where the business is today. But regardless of whether the cash is okay today, that may not be the case a year from now, especially if the pandemic is still around. One estimate from the International Air Transport Association projects that it won’t be until 2024 that the airline industry recovers and gets back to its pre-pandemic levels. I’m not sure Bombardier will be able to hang on long enough to see the recovery.
Great Canadian Gaming
Another stock to avoid right now is Great Canadian Gaming (TSX:GC). A year ago, I would’ve told you that at around $30 per share, investing in this casino operator would be a bargain. But today, amid COVID-19, that just isn’t the case anymore. Social-distancing protocols and concerns related to the coronavirus are sure to keep people away from casinos, even if they’re open. And even if the economy does slowly recover, the danger of a second wave of COVID-19 could derail any progress and send Great Canadian and other stocks dependent on in-person traffic back into a tailspin.
In Great Canadian’s second-quarter earnings release on August 12, the company confirmed that its facilities have remained closed since March 16. However, it noted that it is working on reopening some locations now that some provinces are permitting casinos to get back up and running.
Its revenue of $62.8 million in Q2 was down 82% year over year, as it’s still generating sales due to some of its agreements, which are in effect, even though casinos aren’t operating. Great Canadian incurred a loss of $36.4 million for the period compared to a profit of $122.2 million a year ago.
Although the company could recover as cities reopen, Great Canadian is still a very risky stock to invest in today.