The 7 Worst Stocks to Buy in a Bear Market

Stock markets have been in a bear market for over six months with no sign of ending soon. The recent data signals things will get even rougher for investors, which points to a torrid time ahead for investors.

In a bear market, there are specific types of stocks that investors need to avoid. The worst stocks to buy in a bear market are those that are highly leveraged, have poor track records, and operate in cyclical or interest-rate-sensitive industries. These businesses are prone to economic fluctuations.

While there have been some bright spots in the market recently, such as the strong performance of tech stocks, the market is still very weak overall. Investors should be cautious and prepare for more losses in the months ahead. Analysts caution investors to be prepared for more volatility and downside risk in the months ahead.

Worst Stocks to Buy in a Bear Market: Tilray Brands (TLRY)

Tilray Brands (NASDAQ:TLRY) has been one of the more popular cannabis stocks over the past few years. However, it hasn’t backed up the positive investor sentiment with its fundamentals. The company’s top-line expansion has slowed down over the past few quarters, despite a thriving Canadian cannabis market. Moreover, Tilray’s high-profile acquisitions of Aphria haven’t borne fruit either, putting more pressure on its bottom line.

In Tilray’s latest earnings call, it reported an 8.8% drop in sales from the prior-year period. Moreover, it ended the quarter with a net income margin of negative 29.3%. Its business continues to buckle under the pressures exerted by the testing macro-economic climate and is likely to suffer for the foreseeable future. Also, TLRY stock is likely to move sideways without substantial exposure to the U.S. market.

Redfin (RDFN)

Redfin (NASDAQ:RDFN) is one of the worst stocks to buy in a bear market. RDFN stock has shed more than 80% of its value in the past 12 months and continues to trade in the red, with equity markets in shambles.

One of the company’s main issues is cost structure, which is more fixed than its peers. Its revenue growth has slowed dramatically in recent quarters, while its gross margins have tanked. Additionally, Redfin has net debt of over $1.5 billion, putting it in a precarious situation in an impending recession.

Homebuyers are in a rough spot with the Federal Reserve continuing to raise interest rates at regular intervals. As a result, Redfin is likely to continue to underperform the market in the coming months. It employs real-estate agents directly, which has put immense pressure on the firm’s bottom line. Furthermore, its supply of homebuyers is drying up amidst rising mortgage prices.

Worst Stocks to Buy in a Bear Market: Coinbase (COIN)

As any crypto enthusiast knows, Coinbase (NASDAQ:COIN) is a major player in the crypto sphere. However, despite its strong position, the company faces some fundamental headwinds that negatively affect its results. The company’s short-term prospects aren’t any better, as it continues to face challenges in the form of negative market sentiment and regulatory uncertainty.

The firm reported a massive revenue miss, with revenues down close to 55% from the same period last year. With the entire crypto space in a fix, Coinbase reported sizeable drops in trading volumes and its asset base. It swung from a $400 million profit last year to over a $0.5 billion loss in the quarter. Hence, its business is under immense pressure, and its stock is unlikely to move much without a more conducive economic environment.

FuboTV (FUBO)

FuboTV (NYSE:FUBO) is a leading virtual multichannel video programming distributor (vMVPD) with a leadership position in the space. Though its witnessed triple-digit average top-line growth in the past five years, the cracks in its business model are becoming more evident than ever.

The main problem with its business is that all the money from its subscriptions must be handed over to content owners for sporting rights. Hence, its business is an inherently low margin, without support from other income streams.

It turned heads with its foray into the sportsbook business. However, after a strategic review, it recently announced its exit from the business. Though it didn’t plan to generate meaningful sales from the segment until 2023, it’s clear that sports betting was a critical element of its plans. Unless it can find a way to curb its costs, it will have to dilute shareholders or take on expensive debt to operate beyond 2023.

Worst Stocks to Buy in a Bear Market: Carnival (CCL)

It’s been another challenging year for Carnival (NYSE:CCL). The company’s shares are down more than 62% for the year, and global cruise revenues are not projected to return to pre-pandemic levels for another five years. However, Carnival Corporation has seen bookings substantially improve from pandemic conditions; hopefully, the worst is behind it. Still, with high debt and global economic uncertainty, CCL is an extremely risky investment at this time.

Its third-quarter results missed expectations on both lines, and while analysts expected negative earnings per share, CCL has made a habit of missing expectations. Earnings have trailed consensus estimates in the past 11 quarters.

Its challenging recovery has been exacerbated by China’s Covid Zero policy and massive debt load resulting from its ships docked for the better part of the pandemic years. Hence, CCL remains an incredibly risky bet at this time.

Annaly Capital Management (NLY)

Annaly Capital Management (NYSE:NLY) is a mortgage real estate investment trust that has been a horrible investment over the past 10 years. Its book value dropped again in the third quarter, while net interest margins plummeted due to higher interest costs. With current mortgage rates rising at a healthy pace, NLY faces an even more challenging time ahead.

New interest rate hikes and volatility will continue to hurt NLY and its peers. The firm recently undertook a reverse stock split to inflate its value, but the market didn’t take too kindly to the development. Moreover, inflation numbers are still far from where they should be, which points to higher rate hikes. Hence, things aren’t getting any easier for the firm anytime soon.

Worst Stocks to Buy in a Bear Market: RH (RH)

RH (NYSE:RH), formerly Restoration Hardware, sells high-end furniture to customers in-store and online, establishing itself as one of the top brands in the sector. Though it’s held up well so far, its business should falter in the event of a white-collar recession, which directly impacts its customer base. As a consumer discretionary stock, it finds itself in a dicey situation in the current economic climate.

Furniture sales are directly linked to home sales, which have been deteriorating every month this year. RH hasn’t provided any sales guidance for 2023, but based on the current market conditions, it’s likely to experience further sales contraction in the coming year. A recession will be a major blow to the company, and it will be interesting to see how it responds in the coming months.

On the date of publication, Muslim Farooque 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.