2 Stocks I’d Avoid in 2024

Are you looking for stocks to buy in 2024? Well, perhaps keep these off your list — at least for now.

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Caution, careful

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When it comes to investing, many Canadians likely are flooded with what they should buy. But what about the stocks that they should avoid? Today, we’re going to get in that, and look at some of the biggest companies that may not do so well the rest of this year. So, let’s get into it.

Suncor stock

It used to be that one of the best stocks for dividends and returns was Suncor Energy (TSX:SU). Yet, times have certainly changed. Firstly, the oil industry is under significant pressure from increased environmental regulations and a global shift towards renewable energy. This transition diminishes the long-term growth prospects for traditional oil companies like Suncor.

And volatility is already there. For the first quarter of 2024, Suncor Energy reported net earnings of $1.61 billion, or $1.25 per common share, which represents a decrease from the $2.05 billion, or $1.54 per share, reported in the same period the previous year. Despite beating analyst expectations with an earnings per share (EPS) of $1.41 (versus the expected $1.23), the net income has shown a significant year-over-year decline.

Furthermore, Suncor’s performance is highly sensitive to fluctuations in oil prices. Any economic downturn or geopolitical instability can severely impact oil prices, leading to volatility in Suncor’s stock. The combination of these factors makes Suncor a riskier investment choice in the current market environment. Even with a 4.23% dividend yield.

CT REIT

Another company investors may want to avoid for now is CT REIT (TSX:CRT.UN). This real estate investment trust has faced significant declines due to rising interest rates, which have impacted property values. Although it provides steady distributions, the overall market environment poses challenges for its growth.

As a real estate investment trust (REIT), CT REIT’s value is closely tied to its property portfolio, which has suffered due to these market conditions. While it offers a 7% distribution yield, the potential for further declines in property values and ongoing interest rate highs pose significant risks to its future performance.

Shares are now down 11% in the last year alone, though with some earnings improvement. Net operating income (NOI) increased by 5.6% to $113.5 million compared to the same period in 2023. Funds from Operations (FFO) rose by 3.8% to $78.2 million, and adjusted funds from operations (AFFO) grew by 4.9% to $72.6 million. These improvements were driven by higher property revenues and increased recovery of capital expenditures despite higher interest expenses. The REIT also announced a 3.0% increase in distributions, reflecting its robust financial health.

Yet, with higher interest rates still on hand for a company that remains quite dependent on retail locations, it might be best to avoid for now.

Bottom line

Overall, there are reasons enough to avoid both of these stocks. Investors should avoid Suncor Energy in 2024 due to its vulnerability to fluctuating oil prices and the broader industry’s shift towards renewable energy. Environmental regulations and geopolitical instability also add significant risk, impacting Suncor’s long-term growth prospects and making it a less attractive investment.

Furthermore, CT REIT faces challenges due to high interest rates, which have negatively affected property values. Despite solid recent earnings, the overall market environment poses risks to its future performance. The decline in real estate market stability and higher interest expenses make CT REIT a cautious investment choice.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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