The recent growth-driven sell-off has been absolutely vicious and unforgiving to beginner investors chasing returns. Indeed, the tables have turned in a big way, with the biggest winners of 2020 now seen as some of the biggest losers in the first five months of 2021.
Whether or not the pain continues is anybody’s guess. Regardless, I do think that inflation jitters and the threat of higher rates could propel some of the more speculative, unprofitable so-called story stocks much farther into the abyss. So, if you’re going to attempt to catch the fastest-falling stocks in this market, you’d better be ready for pain because odds are, you won’t catch the bottom and will have to deal with continued pressure to the downside as margin calls come flowing in for the many beginner traders.
In this piece, we’ll have a look at two of the most beaten-down Canadian growth stocks that have shed over 66% of their value this year. We’ll have a brief glimpse at each name to see which, if either, is worth taking a chance on amid its profound negative momentum.
Consider Facedrive (TSXV:FD) and Score Media and Gaming (TSX:SCR)(NASDAQ:SCR), or theScore for sort, two major multi-baggers that are now surrendering a huge chunk of their gains. Each tech stock is down a staggering 74% and 66% at the time of writing.
Facedrive was a pretty hyped-up stock last year, as it climbed from $2 and change in early 2020 to just north of $54 in early 2021, before plunging to $14 and change, where shares currently sit today. Some Fool contributor touted the white-hot momentum stock as the next Tesla. I referred to Facedrive as more of a smaller electrified version of Uber or Lyft. I saw no reasons to own the stock as it climbed from the depths of the TSX Venture Exchange.
I just did not get the Facedrive growth story. And I was perplexed as to why investors were piling in at the rate they were, given the lack of durable competitive advantages versus the competition. In numerous prior pieces, I urged investors to steer clear of the name, as the risks of a steep drop were ridiculously high.
Fast-forward to today, and Facedrive stock has been cut in half twice. Despite the drastic pullback, I still don’t see value in the name and wouldn’t look to buy at any price.
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Score Media and Gaming
Score is another stock that suffered a massive fall from grace. Although the stock’s negative momentum is accelerating, I wouldn’t be against nibbling into a small position, as the longer-term opportunity in the budding sports betting market, I think, is worth a gamble.
Fellow Fool contributor Ambrose O’ Callaghan recently named Score Media as their top pick for May 2021, citing Bill C-218 (aka the Safe and Regulated Sports Betting Act), which recently passed, as a major catalyst for the stock that many investors may be overlooking amid the broader souring of high-growth names.
I think O’ Callaghan is right on the money. Score stock is oversold here, and it’s one of the more attractive speculative plays for investors who are hungry for the mother of all bounces. Score stock could easily score a front-row seat to a market worth north of US$5 billion.
Both Score and Facedrive stocks are still quite pricey, with both names trading at north of 50 times sales. That said, I do think Score can grow into its multiple over the next few years.
As for Facedrive, I’d continue to steer clear.
Speaking of ample upside, you need to check out these following stocks curated by the team here at the Motley Fool Canada!
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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.
Joey Frenette doesn't own any stocks mentioned. The Fool owns shares of Tesla.