Not all stocks are a buy on the dip. Early signs are visible in frequent management changes. Thus, many investors sell shares on senior management’s exit, particularly in small companies where the business depends on the owner.
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Two Canadian stocks that could destroy your portfolio
goeasy (TSX: GSY) stock has already destroyed the portfolio of those who invested in it. The stock has lost 83% in value since September 2025, when short-seller Jehoshaphat Research highlighted major accounting discrepancies. Most of its findings came true in the fourth-quarter earnings.
The world has changed for goeasy as the key reason for buying this stock has vanished. goeasy is in the business of lending to subprime customers. They charge a higher interest rate ranging between 9.9% and 35%. This interest rate is attractive only when net charge-off (NCO) rates are low.
For a long time, goeasy maintained an NCO rate of 9.2%, which means 9.2% of its total loan portfolio is not recoverable. For a subprime lender, this is a good number as credit risk is maintained. Contained credit risk and a growing loan portfolio were the main reasons to buy goeasy.
However, goeasy lost this very reason as structural issues came into the limelight. The lender’s reported NCO rate was artificially deflated. As a rule, a lender should assign loans whose payments are delayed by 90, 120, or 180 days as charge-offs. goeasy tweaked the definition and accounting policies.
goeasy used tools like a partial payment of the monthly installment, extension, and rewriting of loans to delay delinquency. When a loan is rewritten, overdue interest is waived off, and the loan begins from scratch. This resetting of delinquency status allowed delinquent people to remain non-delinquent. This credit risk came all at once in the fourth quarter of 2025 and increased goeasy’s net charge-off rate to 23.8% from 9.2% in the previous quarter. Its chief executive officer and chief financial officer exited, and the stock crashed.
Is this dip a buying opportunity?
goeasy is now in firefighting mode, cleaning up the mess and preserving liquidity. The problem is structural, and it will take a lot more than just absorbing the credit risk to revive goeasy’s business. There could be a goodwill impairment, as investors will take time to regain confidence. The lender will need new management, policy-level changes, and tighter underwriting criteria, which could affect its portfolio growth in the medium term.
goeasy stock can destroy your portfolio. Invest in it only if your investing game is buying troubled companies.
Other stocks that could significantly pull down your portfolio
Timbercreek Financial (TSX: TF) is a short-term mortgage lender that gives loans to commercial real estate investment trusts. More than 66% of its loan portfolio is from repeat customers. It has so far been transparent about loans that moved to Stage 2 and Stage 3. The lender even increased its expected credit losses from $16.1 million in 2024 to $17.9 million in 2025, resulting in a net loss of $1.1 million.
A loss-making company cannot keep paying dividends for long. I won’t be surprised if Timbercreek pauses dividends. So far, dividend payments are going as usual. Avoid buying this stock, as it could lose 50% in value if there is a dividend pause. The one thing going well for Timbercreek is that there is no change in the management. Weak fundamentals but sticky management is keeping the stock afloat.
Freehold Royalties (TSX: FRU) is another stock to stay cautious about due to its recent management changes. It removed the chief operating officer position in November 2025, as it has no operational risks. It buys land and leases it to oil companies to extract oil. However, its chief financial officer is also exiting, and the company will search for a replacement.
It could be an early sign of structural weakness, like that of goeasy, or just streamlining of operations. Before the risk becomes visible in the fundamentals, one could sell the stock while it still trades closer to its 52-week high.
Preserving your portfolio
If you have high exposure to risky stocks, you could consider selling them and instead buy Topicus.com and Descartes Systems. They have strong management and resilient fundamentals.
