4 Stocks Financial Experts Are Never Buying
Written by
Martin Dasko
Edited by
Laura Bogart
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The S&P 500 went up 24.23% in 2023 after a turbulent year in 2022, so those who stayed invested in the market saw their portfolios bounce back. However, just as important as it is to purchase the right stocks, it’s equally essential to know which companies and types of companies you shouldn’t invest in.
This article will examine the stocks and types of stocks that financial experts will never buy.
What Are Stocks That Financial Experts Will Never Buy?
Here’s a closer look at some options you might want to avoid.
MicroStrategy ($MSTR)
Marc Lichtenfeld, chief income strategist at The Oxford Club, informed us that he’s not a fan of investing in MicroStrategy because he feels that the company exists to buy and hold Bitcoin.
Lichtenfeld elaborated:
“Investors are at the mercy of when CEO Michael Saylor decides to raise capital by borrowing money and buying Bitcoin. This takes place at the highs because when Bitcoin is strong, that’s when the banks will lend Saylor the money. They’re not interested in lending cash when Bitcoin is falling. So he’s always buying at the highs.”
As of June 20, MicroStrategy owned 226,331 Bitcoins worth about $ 5 billion after acquiring another $786 million worth of the cryptocurrency. The company has been accumulating the digital asset since 2020.
Lichtenfeld added, “If you want to own Bitcoin, own Bitcoin, either directly or through an ETF. There’s no reason for anyone to own this stock.”
Tesla, Inc. ($TSLA)
“Though the stock has been on a tear this summer, I don’t want to invest in a company where the CEO is so distracted,” Lichtenfeld said. “In addition to Tesla, Elon Musk runs X, SpaceX and is involved with who knows how many other projects.”
Many other analysts agree that Musk is too distracted by his various business ventures. Steve Westly, a former board member, even went on record recently to state that Tesla needed more focus from Musk. Even though Westly admitted that Musk has a proven track record, there’s no doubt that investors and analysts would like to see the controversial leader less distracted.
Lichtenfeld concluded, “There’s no doubt that Elon is brilliant, but there are many more companies to invest in where the CEO is singularly focused on making just one company the strongest it can be.”
NVIDIA Corp. ($NVDA)
“As of today, NVDA is selling for a price that will be hard to justify,” commented Paul Gabrail, founder and host at Everything Money.
Gabrail noted that he will invest in the stock someday in the future when the price and fundamentals get back together to a reasonable level.
Some analysts agree that the stock price is too high and that the company may have benefitted from investors getting caught up in the hype. Even though Nvidia has been able to capitalize on the AI boom and beat Wall Street’s estimates for the last few quarters, there are concerns that this pace of growth can’t keep up like this.
Commodity-Driven Companies
“I prefer to avoid commodity-driven businesses such as oil and copper because the cyclicality and movement of those commodities are ones that I don’t understand,” Gabrail said.
Investing in stocks tied to commodities will mean you’ll likely experience some volatility, and not all investors are comfortable with this. While it’s generally believed that some of these stocks can serve as an inflation hedge, if you don’t understand the field, you may not be ready to invest your money into it.
The Logic Behind Avoiding Certain Stocks
What are the considerations by which financial experts evaluate a stock to determine if it’s worth buying?
Understanding the Business Helps
“I want a business that I can understand,” Gabrail said.
Warren Buffett is known for saying he doesn’t invest any money into a business he doesn’t understand. Buffett tries to do his best to learn about how the business operates and works before he puts any money into it. This makes sense because you want to know where your money’s going, and it’s challenging to invest in a company if you don’t understand what it does.
You don’t want to invest in stocks if you don’t understand how the company makes money. This means you’ll have to stay patient and do your best to avoid speculation when you hear about a meme stock like GameStop taking off.
The Business Should Have Staying Power
“A business that has staying power and I think will be around for decades to come is worth investing in,” according to Gabrial.
Warren Buffett is famous for sharing that his favorite holding period is forever, meaning he’s a long-term investor in companies he believes are in for the long run. If you want to invest like the experts, you’ll want to avoid companies that are fairly new or haven’t been proven yet.
Look For Undervalued Companies
“I would buy any company selling for less than I think it’s worth,” Gabrail said. “I would only ignore stocks that are selling for unreasonable prices.”
Gabrail noted that he looks for stocks for which he can pay a reasonable price. This means that sometimes you’ll have to fight the temptation to invest your money into stocks that are making headlines and catching lots of attention based on hype or momentum.
Gabrail concluded by stating that simplicity is usually the best strategy for investing. If you’re looking for assets to invest in, we suggest that you consult a financial professional so that you make the best decision for your financial situation.
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