How do you lose an entire $100,000 portfolio?
It’s not the easiest task in the world, but it can be done.
As stocks like Enron and Worldcom show us, if you throw all of your eggs into a fraudulent basket, you can make virtually unlimited amounts of money go to zero.
So, it’s certainly possible to utterly destroy a $100,000 portfolio. The hard part is identifying the kinds of stocks that will do it in advance. In this article, I’ll share two stocks that could utterly destroy a $100,000 portfolio, starting with one of the biggest reverse-success stories in Canadian business history.
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Canopy Growth Corp
Canopy Growth (TSX: WEED) is a company that once seemed to have it all. In 2018, the year when cannabis was legalized, this cannabis company was riding high in the markets, securing $5 billion in investments, and about to see its revenue increase dramatically. Canopy Growth had the wind at its back.
Indeed, immediately after the Federal government legalized cannabis, Canopy Growth Corp did seem to be doing well. Its revenue increased as expected, and it began opening retail stores in provinces that allowed it.
Today, the stock is down 99% from its all-time high.
What has happened?
Put simply, Canopy has failed to make money. It has lost money every year since it hit its all-time high, burned through almost all of the $5 billion investment it received, and even seen its revenue decline. On top of all that, it has taken numerous write-downs attributed to 2017-2018 investments that ended up going nowhere. Today, cannabis is a commodity, with many companies supplying it all across North America. It appears unlikely that Canopy Growth will recover.
Algonquin
Algonquin Power & Utilities (TSX: AQN) is a stock that appears to have it all on the surface. It has a high yield (4.05%). It’s in a “hot” industry (renewable energy). It’s growing (by some metrics). What could there be not to love here?
Unfortunately, quite a bit.
When you look at Algonquin’s dividend track record, you see many signs that Algonquin is being mismanaged financially. Over the last two years, the company has cut its dividend not once, but twice. Despite the cuts, the stock still has a relatively high 78% payout ratio. Its earnings are presently down from their 2018 high, though improved from 2024. Basically, this company has all the signs of a high-ish dividend payer that will have to cut its dividends again. When known dividend stocks cut their dividends, their shares tend to take a hit, because the cuts signify that there is something wrong financially. For now, I’d stay away from Algonquin Power & Utilities stock.
Foolish takeaway
It takes a lifetime to build a portfolio, but just one bad trade to ruin it. Not all stocks are guaranteed moneymakers. If you pick a bad one, the limit to how much you could lose is theoretically -100%, but as Canopy Growth Corp and Algonquin Power show, there is no limit to how much punishment a company can subject its shareholders to. Avoid stocks like these, and you’ll do well.
