Want to Retire Rich? Avoid These 2 Super Risky Stocks

If you’re looking to retire in abundance, avoid betting on risky assets such as the Air Canada stock and Cineplex stock. There are other investment choices with visible growth and income potentials.

| More on:
Road signs rerouting traffic

Image source: Getty Images.

The airline and entertainment industries are among the hardest hit by the 2020 pandemic. COVID-19 brought massive destruction to the operations of erstwhile viable investments. If you’re looking to retire rich, stay clear of Air Canada (TSX:AC) and Cineplex (TSX:CGX). Both are two super risky stocks because recovery is very uncertain.

Dominant air carrier in distress

The impact of COVID-19 on the airline business is unprecedented. Air Canada investors lost 53% in 2020 after the coronavirus virtually reduced passenger travel demand to zero. Canada’s flag carrier’s share price as of this writing is $22.92, or 56% lower than a year ago.

In the most recent quarterly report (quarter ended September 30, 2020), Air Canada’s total revenue fell sharply by 86% to $757 million. The company also reported a negative EBITDA of $554 million compared to the $1.47 positive EBITDA in Q3 2020.

It’s been three consecutive quarters of losses, which negates Air Canada’s record of the 27 straight quarters of profits before the pandemic. As part of its recovery plan, management announced in November 2020 the downsizing of aircraft and workforce to mitigate the mounting losses.

Air Canada expects the fleet restructuring and rationalizing to lower capital expenditures in 2020 to 2023 by around $3 billion. Thus far, the $6.79 billion airline company has laid-off 20,000 workers. Analysts forecast the stock to climb by 53% to $35 in the next 12 months, although it hinges how quickly travel demand will return to pre-corona levels.

Former Dividend Aristocrat in oblivion

Cineplex lost its Dividend Aristocrat status after the company suspended dividend payouts in early 2020. The iconic entertainment stock lost 72% last year, which is a bitter pill shallow. Loyal investors were receiving an average 5.97% dividend over the previous five years.

In the nine months ended September 30, 2020, Cineplex’s revenue dropped a whopping 70.1%, from $1.2 billion to $365.8 million. Theatre attendance fell 75.2% to 12 million. Net loss for the first nine months of 2020 was $393.6 million versus the $31.8 million net income in the same period in 2019.

The bread-and-butter box office revenue decreased by 91.8% to $14.5 million. Meanwhile, theatre food service revenue also fell significantly (88.1%). The digital commerce segment was the only bright spot as total registered users for the Cineplex Store increased by 41% in Q3 2020 versus Q3 2019.

Cineplex’s economic pain began on March 16, 2020, after the World Health Organization (WHO) officially declared COVID-19 as a global pandemic. It was the trigger for the unceremonious business disruption of Canada’s beloved entertainment and media company.

This year isn’t looking any better for Cineplex. The vaccination campaign will not guarantee movie operations to return to normal. Social distancing measures will remain in place for an extended period. People are not likely to congregate in indoor places for fear of contracting the more lethal COVID strain.

Cineplex has lost its appeal that it wouldn’t be wise to purchase even at its current depressed levels. It will take time for the company’s core business to generate significant cash flows like before.

Big gamble

Air Canada and Cineplex are among the TSX’s cheapest stocks in 2021. However, growth or recovery might not come at all in the near future. It would be a useless expense and a big gamble to initiate positions in either stock.

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 Christopher Liew has no position in any of the stocks mentioned.

More on Investing

Target. Stand out from the crowd
Investing

2 Canadian Stocks I’m Buying Lots of This Year

I’m looking to snatch up exciting Canadian stocks like VieMed Healthcare Inc. (TSX:VMD) throughout 2023.

Read more »

grow money, wealth build
Dividend Stocks

Got $3,000? 3 TSX Growth Stocks to Buy in January 2023

Top TSX growth stocks that look appealing for 2023.

Read more »

woman data analyze
Dividend Stocks

Need Passive Income? Turn $15,000 Into $851 Annually

This passive-income stock is already climbing higher, up 16% in the last three months! Yet it's still valuable, so you…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: 3 Reliable Canadian Dividend Stocks to Buy Now for Passive Income

Top TSX dividend stocks now appear oversold.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Investing

2 TSX Stocks Safer for Investing in a Recession

These consumer companies will likely beat the broader market averages amid a recession. These stocks offer stability, income, and consistent…

Read more »

Dividend Stocks

For $100 in Passive Income Each Month, Buy 1,500 Shares of This REIT

REITs such as Northwest Healthcare can enable investors create a passive-income stream as well as benefit from capital gains.

Read more »

A colourful firework display
Dividend Stocks

2 Canadian Growth Stocks (With Dividends) to Start 2023 With a Bang

Here are two of the best dividend-paying Canadian growth stocks you can invest in at the start of 2023 and…

Read more »

sale discount best price
Dividend Stocks

4 Insanely Cheap Canadian Stocks to Buy for Passive Income

The recent bear market has created some incredible bargains, especially for those looking for passive income. Here are four cheap…

Read more »