Contrarian Investing: Taking a Chance on Beaten-Down Stocks
When it comes to investing in struggling stocks that are heavily shorted, the risks are undeniable. However, if these stocks can turn things around and prove their doubters wrong, the potential upside can be substantial. For investors with a high risk tolerance, there are three contrarian plays worth considering: Medical Properties Trust, Beyond Meat, and Plug Power.
Medical Properties Trust: A REIT in Need of a Turnaround
As a real estate investment trust (REIT), Medical Properties Trust offers recurring dividend income and stability. However, its stability is heavily reliant on its tenants. With past issues with key tenants, including Steward Health’s bankruptcy filing, Medical Properties’ earnings have been turbulent, resulting in a disastrous 79% decline in stock value since 2021. Short interest remains high at around 50% of the stock’s float. To turn things around, Medical Properties needs to demonstrate positive earnings numbers and prove its new tenants are safer. With interest rates potentially decreasing next year, REITs may become more attractive investments, making Medical Properties a potential contrarian play.
Beyond Meat: A Struggling Plant-Based Food Company
Beyond Meat’s performance has been dismal, with demand being unimpressive and gross margins often negative. Short interest is high at 40%, and the stock has lost a staggering 95% of its value since 2021. To turn things around, Beyond Meat needs a plant-based product in high demand, allowing it to charge a high enough price to significantly bolster its margins. Until that happens, it’s difficult to see a path for a turnaround. This food stock may be too risky even for contrarian investors.
Plug Power: A Hydrogen Energy Company in Trouble
Shares of Plug Power have plummeted over 90% since 2021 as the hype surrounding hydrogen energy has crumbled. The company has reported massive losses, with a net loss of nearly $1.5 billion on sales of $684.5 million. Short interest is just under 30%. If you’re a believer in hydrogen energy, you might be tempted to take a chance on Plug Power. However, the risk is that the company may not be around even if hydrogen energy takes off. Plug Power needs to drastically slow its cash burn and cut expenses to have any chance of turning things around.
While these stocks come with significant risks, they may offer potential contrarian plays for investors with a high risk tolerance. However, it’s essential to approach these investments with caution and carefully consider the risks involved.
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