3 Meme Stocks that You Should Sell Before they Become the Next Tupperware

Stocks to sell

By no means is this discussion about meme stocks to sell an indication that you should avoid the sector altogether. Sometimes, it’s good to just have fun (responsibly, of course) in the market. Ultimately, you never know if that wild contrarian wager might turn into something substantive. That, of course, is the main temptation of risky meme stocks.

However, this segment of the market (which really materialized during the Covid-19 crisis) presents substantial dangers. Yes, you can get rich with highly speculative ideas. At the same time, you should be aware of the concept of survivorship bias. In short, you don’t want to exclusively focus on those that made it and ignore those that didn’t.

Chances are, you should avoid meme stocks rather than buying them. Fundamentally, you just don’t know whether an embattled organization will rise from the grave. And even if it does, you need to be disciplined enough to sell out while you still can.

It’s a tough way to make a living. While vagaries will always exist regarding market trajectory, you should probably sell these meme stocks below.

Meme Stocks to Sell: Peloton (PTON)

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At this point, shares of home exercise equipment manufacturer Peloton (NASDAQ:PTON) should come with a label. Warning: meme stocks turning into Tupperware (NYSE:TUP). While TUP skyrocketed in recent sessions, it doesn’t take away from the harsh reality that in the trailing year, it tumbled 66%. In Peloton’s case, fading relevance has seen PTON lose more than 32%.

That, in and of itself, might not be too terrible, especially compared to other meme stocks to sell. However, without the fear of Covid-19 encouraging people to isolate themselves from society, Peloton will be a tough brand to market, especially when consumers are facing so much pressure.

Financially, investment data aggregator Gurufocus warns that Peloton suffers from five red flags. These include poor business operations (as evidenced by its rock-bottom Piotroski F-Score) and a distressed enterprise (noted by a negative Altman Z-Score). Also, inventory has been building up, which frankly isn’t surprising. Also, it doesn’t help confidence when so many Peloton executives are rushing to exit out of PTON stock. It’s one of the risky meme stocks to avoid.

Mullen Automotive (MULN)

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Earlier, a gentleman reached out to me via LinkedIn offering me important information about Mullen Automotive (NASDAQ:MULN) to write a more revealing (and presumably bullish) article. After a few “Rickrolling” incidents, I generally don’t deal with unsolicited LinkedIn proposals.

However, since we’re dealing with meme stocks to sell, let me say this. It’s not I that needs information to write better articles. Instead, that information needs to be sent to Mullen’s management team to operate a better company. Because no matter what datapoint is out there, the harsh reality is that MULN stock lost almost 99% of equity value since the start of the year.

If that wasn’t enough, InvestorPlace Markets Analyst Thomas Yeung sounded the alarm on June 22 that Mullen may have too little cash to survive. The electric vehicle manufacturer is hanging on but since Yeung’s article was published, MULN lost 39%. Unsurprisingly, Gurufocus identifies four red flags, including the issuance of long-term debt. Ultimately, you should avoid meme stocks that promise the world but are simply not getting things done.

WeWork (WE)

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To be quite blunt, WeWork (NYSE:WE) is a tricky enterprise to label as one of the meme stocks to sell. That’s because WE gained over 43% of equity value during the Aug. 10 session. As Fortune pointed out, the swing higher seems to lack much rationality. Glancing at its short interest data, I’m not seeing anything remarkable. It could just be that folks have decided to take a potshot.

Logically, though, you should sell these meme stocks that suffer severe fundamental vulnerabilities. And that’s the case with WeWork. According to a recent AP report, the company warned that there’s “substantial doubt” about its ability to stay in business. In part, management cited financial losses along with its need for cash. To be fair, the intense retail interest in WE could swing shares violently in either direction. However, this has really turned into a casino play, not a legitimate investment.

Gurufocus warns that WeWork suffers from five red flags, including the issuance of new debt and a distressed enterprise. There’s not much to say other than it’s one of the meme stocks to sell.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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