2 beat stocks I wouldn’t buy with free money

There are stocks you shouldn’t bother investing in, even if it costs you nothing. There is always an opportunity cost to consider – like earning a lower return as a result of a poor investment decision. That’s why no matter how you accumulate money to invest, you don’t necessarily want to make rash investment decisions.

A few stocks that seem too risky to buy even with free money are Tilray Brands (TLRY 4.36%) and Blackberry (BB 2.34%). Here’s why you better avoid these companies.

1. Tilray brands

Investing in cannabis is risky, given the high level of competition in the growing industry. Generating consistent growth and profits is rare. And while Tilray’s business has grown over the past year, that’s mostly due to its merger with low-cost marijuana producer Aphria, which shut down in May 2021. But revenue of the cannabis company has flattened out recently and is unlikely to generate significant growth. going to be so easy with an abundance of supply in the market.

TLRY Earnings Data (Quarterly) by YCharts

The company’s net income is also normally in the red, with impairment charges on inventory, goodwill and intangible assets in the fourth fiscal quarter (ending May 31) that recently pushed its net loss to 457, $8 million.

But disappointing finances are only part of why Tilray is a risky buy. I would avoid the stock primarily because of the company’s management, which seems overly optimistic about the future, predicting annual revenue of $4 billion in just a few years (a big jump from the 628 $.4 million announced for fiscal year 2022). Another sign of his overconfidence is evident when he exaggerates his importance regarding legalization in the German market. Tilray recently released a statement saying it was involved in a roundtable there with the German government. This turned out to be a gross error which the German government corrected in a press release.

If you invest in a company whose management misrepresents its business as bigger and better than it is, you run the risk that it will not meet its aggressive forecasts and projections. Tilray falls into this category, which is why it’s a stock I wouldn’t bother investing in. In the first nine months of the year, pot stock is down 61%, and it wouldn’t surprise me if Tilray fell even further in value in the weeks and months ahead.

2. BlackBerry

Technology company BlackBerry hasn’t fared as badly as Tilray, but its stock is also down 50% year-to-date. The problem with this endeavor is that it perpetually seems to be a work in progress. A decade ago, it was known for its popular mobile devices, but intense competition in this space led the company to refocus and shift to cybersecurity and offering enterprise solutions. The company had enough time to pivot and start generating growth again, but it just didn’t happen.

BB Revenue Table (Quarterly)

BB Revenue Data (Quarterly) by YCharts

Last week, BlackBerry released its numbers for its final quarter, the second quarter of fiscal 2023. Sales of $168 million were unchanged from the prior period. While its 63% gross margin looked solid, that was negated by its high operating costs. The company’s research and development and selling, general and administrative expenses totaled $140 million for the period ending Aug. 31 and exceeded BlackBerry’s gross profit of $106 million.

The company has said all the right things in the past, which should have suggested that growth opportunities are on the horizon. Last year, it announced it was expanding its partnership with a Chinese tech company Baidu and that BlackBerry’s QNX operating system would be used in the company’s autonomous driving platform. A few years earlier, in 2019, BlackBerry also announced the acquisition of Cylance, a cybersecurity company that uses artificial intelligence (AI), as BlackBerry said it was taking “a giant step towards our goal of to be the largest and most reliable AI in the world”. -cybersecurity company.”

But these developments have not borne fruit and it is not certain that they ever will. Despite management’s glowing optimism, investors should be aware of what the results say today and where BlackBerry stands today. Its growth record is not impressive, especially since there has been an increase in remote working during the pandemic and when its core business, cybersecurity, should have been in high demand. However, in the last quarter, cybersecurity sales were down 8% year over year.

Without a growth catalyst likely to turn things around for BlackBerry anytime soon, it’s a company investors shouldn’t waste time on because there are better growth stocks to choose from.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool fills positions and recommends Baidu. The Motley Fool recommends BlackBerry. The Motley Fool has a disclosure policy.

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