What types of assets should you buy in order to maximize your wealth?
To answer that question, it helps to think about the opposite — risky investments that risk going to zero.
Legendary investor Charlie Munger was famed for taking this approach, which he summarized with the expression, “invert, always invert!”
If you can find a good way to lose a lot of money quickly, you’ve at least ruled out a strategy, and possibly found the opposite of one that works. With that in mind, here are two extraordinarily risky TSX stocks that risk sending a $100,000 investment to zero.
Canopy Growth
Canopy Growth (TSX:WEED) is a stock that has proven the truth of the maxim “cheap can get cheaper” time and time again. The stock traded at a split-adjusted price of $650 at the height of “cannabis legalization mania” in 2018. Shortly after cannabis was legalized, the stock entered a bear market that saw it decline 99.75% in price, and which it has yet to fully recover from.
While you might be tempted to think that Canopy has to have found a bottom by now, you’d be surprised at how bad things have gotten at the company. After receiving a $5 billion cash injection from Constellation Brands in 2018, Canopy proceeded to run that sum down to less than $400 million.
Since then, Canopy has been burning cash consistently, with negative free cash flow (FCF) of $70.5 million in the trailing 12-month (TTM) period. Granted, that cash outflow was actually less bad than that seen in 2024 — the company was burning cash at rates in the hundreds of millions per year in the 2018-2022 period. However, the company’s total cash pile is now down to $300 as the cash burn continues. This company is going to need some big lenders to step up to even continue operating for more than a few more years, as it is suffering deeply negative cash flows, equalling about a quarter of its cash pile. It’s questionable whether any lender would want to loan to Canopy at less-than-punishing interest rates, though. So, the possibility of this company becoming insolvent can’t be discounted.
BlackBerry
BlackBerry (TSX:BB) is another TSX company whose losses and cash outflows are frequently large as a percentage of its total cash. The company once had a pretty successful smartphone business, but that business was killed off after the iPhone and Android rose in prominence. Since then, BB has been trying to regain its footing in security and car software. The company’s car operating system, QNX, was once thought to hold considerable promise, running in more than 100 million cars. However, the product’s popularity hasn’t been enough to stop the company from losing money more years than not, and from having negative FCF that was nearly 10% of its cash pile in the most recent 12-month period. The probability of a zero with this one is not as high as with Canopy, but it’s not negligible.
The bottom line
When it comes to stocks, it pays to invest in those that are thriving: profitable, growing and entrenched in their industries. Commodity sellers that face significant price competition usually make for worse investments. As shareholders in Canopy Growth Corp and BlackBerry will tell you, the losses in these stocks can be extreme.
