10 stocks you must avoid like the plague

BROWNSTONE RESEARCH SPECIAL REPORT

10 Stocks You Must Avoid Like the Plague

2Brownstone Research | Outlier Investor

If you’ve read the Outlier Investor Manifesto (which I highly recommend you do), you know that the moves of the Big Money are what guide a lot of our investment decision-making.

We start with great companies with strong balance sheets, encouraging growth prospects, and bullish technical patterns. Then, we look to see how much Big Money support each company has.

Only when these factors line up in an attractive way do we add a stock to the portfolio. These situations are rare… In fact, this approach whittles down thousands of stocks to just 20 names each week. And from those 20 names, I find the absolute best one to recommend to you.

But of course, not every stock can be an outlier stock. In fact, many of the most loved stocks in the market fail on each of the criteria I consider for outlier performance. They have poor businesses, unclear direction, and either mixed or misleading technical performance. (Remember: bad stocks can go up too! But usually not for the long haul.)

And if Big Money isn’t giving these stocks the support they need, my system tosses them straight into the recycling bin… for perhaps another day, when they look more like outliers.

You see, my system is extremely picky. That’s why I only pay attention when Big Money buys great companies. On the flip side, if Big Money is selling bad stocks, or when it is buying weak companies, we should pay even more attention.

So in this report, I’ll showcase 10 examples of companies that don’t line up as outlier candidates at the time of writing. The Big Money may want nothing to do with them right now. Or even trickier, there may be signs of buying, but the companies have poor or mediocre fundamentals.

Some of the names on this list surprise you, as you may have seen or heard a lot about them recently. Perhaps you even own a few of them.

But I’m not here to tell you what to do with these holdings – that’s something only you can decide.

What I am here to do is to bring you outlier stocks: the best of the best stocks that Big Money is pouring money into. Like I said, only a handful meet those strict guidelines. And I also want to warn you of potentially dangerous situations, in a way that only my Big Money system can.

Now, let’s look at some names I think you’ll want to avoid…

OVERSTOCK.COM (OSTK)

Overstock.com is an internet retailer specializing in home furniture delivery. Apart from that, the company supposedly has an involvement in cryptocurrency and blockchain technology.

It’s not hard to see why the Big Money is dumping this name. Until last year, it lost far more money than it ever made. And while it used the sudden rise of online shopping during the pandemic to turn itself around, it’s not yet clear whether it will be sustainable. We’ve already seen a few pandemic “winners” pull back substantially as things reopen.

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• 3-year earnings-per-share (EPS) growth of 200.59%

• 3-year sales growth of 46.13%


Plus, there are some clear flaws in its business model. Anecdotally, I once ordered a marble table for my kitchen from Overstock.com. It arrived without one of the four screws required for the base. I alerted the company, and they said they wouldn’t charge me, and would send a replacement. They never did… and never charged me.

Granted, it was in the middle of COVID chaos in early 2020. But that jives with other stories. I’ve heard of several people who order expensive, heavy furniture on Overstock.com, only to send it back when it doesn’t fit their house. The thing is… Overstock eats the entire cost of this transaction. Any buyer can send anything back and not pay a dime.

The company has also made hesitant steps into the cryptocurrency space, making investments in crypto-related companies and accepting bitcoin for purchases. This could be good... or it could be bad over the long run. Overall, it just makes the company’s future even more uncertain to me, especially as its approach to cryptocurrency is so scattershot and unfocused.

And most importantly, I don’t recommend owning this stock because it has never appeared on my Top 20 buy report. For me to recommend

any stock, I need Big Money buying the best quality stocks – and OSTK doesn’t fit the criteria.

RIOT BLOCKCHAIN (RIOT)

Riot Blockchain has the unique quality of essentially calling the top of the first major crypto bull market in late 2018. In December, just weeks before Bitcoin and other cryptocurrencies peaked, the company changed its name from Bioptix to Riot Blockchain, and its company focus from veterinary medicine to all things blockchain and cryptocurrency.

I like companies that devote to a focus and do it better than anyone else. Animal care pivoting to


cryptocurrency is not the recipe I look for in outliers. If you’re a die-hard crypto fanatic and a thrill-seeker, this stock is far better to trade than it is to own. It swings wildly, usually dictated by the price of bitcoin. It’s just not something that belongs in a serious investor’s portfolio.

Of course, our #1 guide is Big Money. And while we’ve seen some buy signals, it’s not for the right reasons. We want Big Money buying the best of the best stocks. Yet RIOT has never appeared on my Top 20 buy report. So, RIOT is not one of them.

POTBELLY CORPORATION (PBPB)

Potbelly is a longtime chain restaurant business headquartered in Chicago, Illinois. If you haven’t heard of it, I can’t say I’m surprised. It’s only got 400 locations worldwide.

When it comes to chain restaurants, having a recognizable brand and a popular product is about the only lifeline to strive toward. That’s what makes other restaurant IPOs, like Shake Shack, far more successful.

Beyond that, it’s a bigtime money-loser that has gone nowhere since its IPO in 2015. It’s loaded with debt, and sales and earnings are going in the wrong direction:

• 8,223% debt/equity ratio

• 9.4% held by insiders

• Earnings growth of -237.6%

• 3-year EPS growth of -584.21%

• 3-year sales growth of -31.95%


• Gross profit margin of -0.7%

Now, the Big Money has both bought and sold this stock. Again, I only get excited when Big Money is buying the best outlier stocks, and doing far more buying than selling. That’s not what we’re seeing here…

Potbelly is no outlier. Avoid it.

FUBOTV, INC (FUBO)

FuboTV falls under the category of those streaming apps that come bundled with your smart TV but that you’ve likely never opened.

It operates mainly in Europe and the United States and offers a limited selection of sports, news, and entertainment content. Like its competitors, it also has a mobile app where users can watch this content on the go.

FuboTV has a noticeable lack of notoriety. But its fundamentals are lacking, too:



Netflix, Amazon, and Disney dominate the entertainment landscape right now.


If this small-time competitor had a unique edge or compet-itive advantage, it might make sense to jump in. But it doesn’t.

Big Money investors have had mixed emotions on this stock over the past year. But don’t let the buy signals fool you. We’re only interested in the best quality stocks backed by the Big Money – not just any stock.

My outlier picking system was specifically designed to isolate the cream that rises to the top. All else is ignored until it’s good enough.

FUBO has never appeared in my Top 20 report. So, for now, it’s no outlier. If it starts growing sales, earnings, profits, and gets Big Money love, then maybe that will change things. But for now, avoid it.

GOGO INFLIGHT INTERNET (GOGO)

Gogo Inflight Internet is, as its name suggests, a purveyor of in-flight internet services. It operates on a subscription model, where users can pay a monthly fee for Wi-Fi internet access on a number of different airlines.

Apart from reportedly subpar connection performance, Gogo has taken criticism for the sheer difficulty of canceling its service. That might have been frustrating for the millions of Americans who chose not to fly in the midst of a pandemic.

The fundamentals of GOGO show a mixed bag: A huge 12-month forward P/E ratio, low insider holdings (I like people who eat their own cooking), and mixed sales and earnings growth:

• No forward P/E because they’re now forecasted to have negative earnings next year






• Gross profit margin of 68.7%

Those fundamentals aren’t outlier fundamentals.


I speak for myself here: whenever I fly, I take the opportunity to unplug. I tend to read a book, snooze, listen to music, or even draw. If I’m working, I work on projects that don’t require internet.

Aside from that, I have plenty of things to keep me occupied. Usually though, I seize the moment to be off the grid at 30,000 feet.

Only the very frequent fliers can truly say they need a service like Gogo.

Here’s what’s important to me: does Big Money need it? The chart again shows some recent buying, but GOGO is conspicuously absent from my best-of-the-best Top 20 report.

For that reason, it automatically goes into the big bucket of non-outliers. And we should avoid it.

CANOPY GROWTH CORPORATION (CGC)

Cannabis. Love it or hate it, it’s hard to not be at least curious.

And Canopy Growth is one of the premier stocks to speculate on the legal cannabis trend. That’s why including it here on this list may surprise you. But at a $3.9 billion market cap, negative earnings, no profits, and low insider holdings this stock screams “all hype and no substance” to me.

• No forward P/E because they’re forecasted to have negative earnings



• 3-year EPS growth of -1,096.7%




While sales and earnings might be moving in the right direction, I prefer lower-risk investments. What I mean is, buying the highest quality companies reduces the risk of owning a dud.

And this year, CGC has seen a flood of sell signals. Moreover, it has never appeared as a Top 20 stock. That report is where I find my outliers.

Remember: I keep the best and chuck the rest. Reason being, I want the odds in our favor of winning long-term. I don’t like unsure bets. And what little Big Money buying CGC has seen in the past is likely due to hype and fear of missing out (FOMO)… that’s not a winning recipe for me.

That’s why I say avoid CGC.

TILRAY (TLRY)

I’m not trying to beat up on the cannabis industry here, but much like Canopy Growth, Tilray more often makes the headlines for its gravity-defying price moves than its business successes.


It’s worth $4 billion in market cap, but it’s a money-loser, just like Canopy. With main operations in smaller markets like Canada and Europe, it’s a limited business, too. And just like Canopy Growth, it’s never appeared on my outlier report of Top 20 stocks. Not an outlier opportunity.

Back in February, there was a spike in Big Money buying that clearly screamed FOMO. But following that leap, Big Money has been dumping this stock. After spiking above $61, it collapsed back down to below $10.

The chart above looks like a roller coaster...

This just isn’t what I look for. Outliers have great businesses with growing sales, growing earnings, fat profits, and consistent Big Money buying.

TLRY just doesn’t line up, so it goes back into the big bucket of non-outliers.

SKILLSOFT CORP. (SKIL)

Churchill Capital Corp. II (CCX) was one more passenger on the SPAC train. I’m no SPAC expert, but I know enough to know there are good ones and not-so-good ones.

In June, CCX combined with Skillsoft Corp (SKIL), a digital corporate learning specialist company.

CCX was little more than a shell company vaguely associated with the SPAC trend. It went nowhere

after its IPO... and didn’t really offer much to get excited about.

And even now that it’s transformed into SKIL, it’s still not very impressive. Big Money has shown some buying, but it’s not clear yet whether it will persist.

And this company has never appeared on the Top 20. It’s not an outlier candidate. Keep the best, chuck the rest. And this one isn’t one of the best.


QIWI PLC (QIWI)

QIWI is a digital payments company servicing Russia, Eastern Europe, and the United Arab Emirates.

Now, digital payments companies are actually one of the investment themes I’m most bullish on for the near future. But when it comes to QIWI, I see some issues.

The first is local risk. When dealing with developing nations, we can see sudden changes. And we got a perfect example of that risk in December 2020, when the Russian Central Bank limited QIWI’s ability to make payments to foreign merchants. That also prevented money transfers from corporate accounts to prepaid cards.

Any business that has key-risk from a sudden sovereign policy change is just too risky for me, usually. In order for me to overcome that risk, I need to see big juice in the balance sheet. Believe it or not, QIWI actually has lovely traits there:

• Earnings growth of 112.9%

• 3-year EPS growth of 253%




But we need great fundamentals and Big Money buying to line up. All that needs to culminate in the stock being in the Top 20 report: better than the more than 6,000 other stocks out there.

My system is mega-picky. And Big Money has been dumping QIWI. On top of that, it’s never been a Top 20 stock. In fact, it has even appeared on my Bottom 10 report. One to avoid.

FUNKO, INC (FNKO)

Funko is one of those misleading ones. On the surface, the Funko Pop figures seem like they’re everywhere and there is solid Big Money buying. So I’m telling you to avoid it?

Let me explain…

Funko’s main business focus is selling pop-culture related merchandise, with a heavy emphasis on their Funko Pop figurines. But that’s the problem… there’s just not much more to say.

My kids definitely love these cartoonish figurines… well, loved them for a few months. It was passing fad. That ship came and went with the fickle winds.

And FNKO has some mixed fundamentals:






So, Funko might be a semi-popular brand for


enthusiasts and teenage collectors, but it’s not really growing earnings.

And there is a perceivable ceiling to its business model. Remember Cabbage Patch Kids? Or Beanie Babies? Well FNKO lines up similar in scope… at least it does to me.

It’s no game-changer business. Outliers have game-changing businesses – at least in their specific industry.

Think of stocks that came along and changed the entire industry. Companies that changed the way we think about phones, music, internet searches, and streaming video. Now think of Funko. Enough said.

FNKO is misleading, because it has seen a fair bit of Big Money buying in the past. Yet as we can see, the trend is now reversing. And it has low insider support. Only 0.86% is held by insiders.

To me, FNKO is a head-fake stock. It looks good on the surface: decent fundamentals and some buying. But it hasn’t yet reached outlier status.

FNKO has never been a Top 20 outlier stock and likely never will be. If it does come around at some point in the future, I’ll entertain it as a possible investment. But for now, it’s too one-sided and subject to its popularity suddenly waning, just like I saw with my kids. For that reason, I’m avoiding FNKO.

Talk soon,

Jason Bodner Editor, Outlier Investor

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10 stocks you must avoid like the plague

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