COVID-19 pandemic-driven new trends and/or pent-up demand created by some of the market disruptions over the past year have heightened the popularity of many stocks with investors. While some names remain investor favorites, many of those that became overvalued during last year’s rally have been selling off with an investor shift to cyclical stocks that are much cheaper and have the potential to benefit from an economic recovery. Given increasing lawsuits and their poor financial performance over recent quarters, we think it best to now avoid Carnival (NYSE:CUK) Corporation (CCL), Peloton (PTON), and Lemonade (LMND). Read on.Increasing demand for products and services due to pandemic-driven trends or pent-up demand created by restrictions on several business activities helped many stocks capture solid investor participation over the past year. However, these stocks’ scintillating rally in some instances has caused a disconnect between the growth prospects and the current valuations of some stocks.
When the economy began recovering earlier this year, investors started rebalancing their portfolios, taking profits from overvalued stocks and moving to capitalize on the economic recovery by betting on cheaper cyclical stocks. While some of these overvalued stocks remain investor favorites given their potential to keep growing, many have been witnessing a sell-off.
We believe popular stocks Carnival Corporation (CCL), Peloton Interactive, Inc. (NASDAQ:PTON), and Lemonade Inc. (LMND) will continue hemorrhaging investors, given their poor financials, which don’t justify their current valuations. So, naturally, we think they are best avoided now.