The stock market remains volatile to start the New Year. Investors and analysts continue to look for clues as to whether the downturn seen during the first trading week of the year is a sign of bigger problems to come or if the bull market seen in the final months of 2023 will continue.
In this uncertain and volatile environment, it would be prudent for people to hedge their bets and avoid stocks that are risky and prone to sharp gyrations higher and lower. Especially lower.
Until we get a clearer idea of the market’s direction, investors would be best advised to focus on quality stocks of established companies that have strong earnings and pay consistent dividends. High-flying start-ups and troubled companies are best avoided for now. Here is safeguard your savings: three stocks to avoid in this risky market.
Boeing (BA)
Few stocks look as risky right now as aircraft manufacturer Boeing (NYSE:BA). The company’s share price is down 9% on the day of this writing after the Federal Aviation Administration (FAA) grounded hundreds of 737 Max 9 aircraft over safety concerns. Specifically, the FAA said 171 Boeing airplanes worldwide are impacted by its “emergency airworthiness” directive that requires the aircraft to be inspected before they can fly again. The order applies to all U.S. airlines and carriers that operate within America’s borders.
The FAA took the action after a piece from a 737 Max 9 airplane blew off in the middle of an Alaska Airlines flight on Jan. 5. The U.S. National Transportation Safety Board has launched an investigation into the incident involving the Alaska Airlines flight. The FAA and other regulators continue to scrutinize Boeing after two fatal crashes of its 737 Max aircraft five years ago. While Boeing’s stock is still up 10% over the past 12 months, its share price is sinking fast due to the latest safety issue that has arisen.
Tesla (TSLA)
Now for some risky behavior. An article just published in The Wall Street Journal newspaper details alleged illegal drug use by Tesla (NASDAQ:TSLA) CEO Elon Musk, including LSD and cocaine. According to the Journal’s account, Musk has also used ecstasy, ketamin, and psychedelic mushrooms. Musk’s attorney, Alex Spiro, was quick to dismiss the report, saying that the Tesla CEO is “regularly and randomly drug tested at SpaceX and has never failed a test.”
Still, the drug story is just the latest controversy about Musk that is roiling TSLA stock. This past November, Musk tweeted anti-Semitic content that drew the ire of politicians and Jewish leaders. Musk has strongly denied holding anti-Semitic beliefs. Regardless, several major companies, including Apple (NASDAQ:AAPL) and Walt Disney Co. (NYSE:DIS), have withdrawn their advertising on social media platform X since Musk bought it in late 2022 over the many controversies.
Tesla’s stock had a great run in 2023 and is up 97% over the past 12 months. However, that gain came after a steep selloff in 2022. So far this year, the company’s share price is down 6%.
Palantir (PLTR)
Analysts see continued risk in holding shares of data analytics firm Palantir (NYSE:PLTR) after the company’s stock surged 150% in the past 12 months. Analysts at Jefferies Financial Group (NYSE:JEF) downgraded PLTR stock to start the New Year, saying that hype related to artificial intelligence (AI) is overblown and that the shares are now likely out of gas. “We underestimated the severity of the slowdown in Palantir’s commercial and government businesses,” wrote Jeffries in a note to clients.
Jeffries lowered its rating on PLTR stock to a “sell” from “hold” previously and lowered its price target on the shares to $13. The note stressed that Palantir’s valuation has become unsustainable after a bull run last year. News of the downgrade comes as the company battles with the U.S. Army, one of its key customers, over data ownership. PLTR stock has dipped 2% to start 2024. Most of the gain in Palantir’s stock last year came in the first half of 2023. In the past six months, the share price is up only 2%.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.