2 Stocks Every Canadian Retiree Should Seriously Consider Avoiding

These two Canadian stocks may be best avoided by long-term investors looking to ensure their portfolios stay well-positioned for any near-term market stress.

Key Points
  • Bitfarms has shifted from cryptocurrency mining to cloud/data center computing, but faces challenges with commoditization and potential AI spending constraints, making it a speculative investment with better growth opportunities available elsewhere.
  • Allied Properties REIT, despite its high dividend yield, struggles with deteriorating fundamentals in the office real estate space and an unsustainable payout ratio, making it a risky choice compared to other Canadian REITs.

I like to spend most of my time discussing top Canadian stocks I think investors should own right now. Whether those are growth stocks, dividend stocks, or a range of other defensive companies in other sectors, I’m finding plenty of incredible bullish cases to be made around a number of leading blue-chip TSX names.

That said, there are still a few TSX-listed stocks I think are worth avoiding right now. For those nearing or in retirement, here are two particular stocks I think are worth avoiding right now.

Bitcoin

Image source: Getty Images

Bitfarms

The cryptocurrency revolution hasn’t really turned out to be what many investors were hoping for. That’s what Bitfarms’ (TSX:BITF) stock chart below highlights.

Now, the company has undergone a switch from a full-blown crypto miner to a cloud/data centre computing story play. Renting out its GPU processing capacity to such companies, the hope was that Bitfarms would see its operating metrics improve.

Unfortunately, that hasn’t been the case. Bitfarms’ peers have all made the same move, and the commoditization of excess computing capacity appears to be driving margins lower. With potential constraints on the horizon around AI spending, and what that could mean for companies at the back end like Bitfarms, this is a more speculative name I think investors should seriously consider moving away from.

That’s simply because there are so many better growth opportunities in the market to consider right now, in my view.

Allied Properties REIT

I’m generally bullish on the Real Estate Investment Trust (REIT) landscape over the long term, but Allied Properties REIT (TSX: AP.UN) is one such REIT I think investors may do better avoiding.

In short, there are a plethora of Canadian REITs to choose from with better balance sheets, net income growth, and payout ratios. I think the company’s near-double-digit dividend yield is worth reminiscing on. Indeed, the market appears to be implying that at some point, Allied will no longer be able to pay out its 7.8% yield. I’m not 100% sure either way on this, but a dividend cut or suspension can be the kiss of death for most firms in this space.

Additionally, the company’s portfolio has deteriorated, with weak fundamentals in the office space driving investors to look at other sub-segments of the real estate market. Until these dynamics shift, this is a stock I’m going to remain wary of here, given Allied’s payout ratio and the seemingly unsustainable yield this stock provides.

Fool contributor Chris MacDonald 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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