There are some stocks that you’d love a chance to buy if they were to drop in value. But there are others that you’re better off just staying away from, even if they get cheaper. In some cases, a bad buy is a bad buy no matter what the price. If you’re buying as a result of price rather than the underlying business, then that’s when you become a speculator and are putting your portfolio at risk.
These are two stocks that investors should resist the urge to buy if there’s another market crash this year:
Bombardier, Inc. (TSX:BBD.B) is a stock that you shouldn’t even accidentally type into a buy order. This company was a dreadful buy even before the pandemic hit and before it decided that it was going to focus on commercial aviation above all else. The company has a horrible reputation for disappointing its customers and a low valuation doesn’t erase those problems nor does it make up for them.
At around $0.30 a share, the stock is trading near its 52-week low. However, the great thing about 52-week lows is that a new low can be just around the corner; if it’s a bad stock, you never have to worry about running out of them.
Year to date, shares of Bombardier are down more than 80%. And if you bought the stock at the turn of the millennium, you would’ve lost 98% of your investment.
Normally, investments rise in value over time but Bombardier’s done the opposite. This is a stock you don’t invest in as it’s suitable for speculators and not a whole lot else. You’re putting your portfolio in harm’s way if you buy shares of Bombardier.
Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR) is another stock that you shouldn’t bother putting on your watch list. Although I could see a scenario where the stock may be a decent buy one day, this is an overpriced stock full of risk that isn’t worth investing in today. While its restaurants Burger King, Popeyes, and Tim Hortons are generally safe investments over the long term, the problem is until the coronavirus pandemic is over, investors should simply avoid restaurant stocks.
The reason being is that even if the market’s crash later this year, odds are that the stock still won’t be a cheap enough buy. Stocks like Restaurant Brands will likely continue falling into next year, especially with no end in sight to the pandemic.
Trading at more than seven times book value and 15 times future earnings, it’s not a cheap enough buy given the risk investors would be taking on. After all, who knows what those future earnings will look like? The company had difficulty growing Tim Hortons before the pandemic and the stock’s problems go far beyond growth right now. The longer the pandemic goes on for, the worse the situation becomes for the company’s restaurants.
Unless you can get the stock near its 52-week low of $36.48, which it only briefly hit during the last crash, this would still likely be too expensive of a stock to buy even amid another downturn in the markets. Even Warren Buffett’s Berkshire Hathaway gave up on this stock this year. Restaurant Brands might be a buy one day, but it certainly isn’t anytime soon.
Here are five better stocks to consider buying today:
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Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares).