When you receive a ton of money, or get caught in some money unexpectedly, it might be tempting to spend that money on something you normally wouldn’t – like a high risk investment. After all, if you lose the money, you will be no worse off than before, and if you guess right, the payout could be substantial. But every decision comes with an opportunity cost. Even if you can afford to lose the money, you might be missing out on better opportunities.
And so, even if someone gave me free money to invest, I still wouldn’t like it for risky stocks. waste Okcugen (NASDAQ: OCGN) or TAL training (NYSE: VALLEY). These stocks have already resulted in significant losses for investors this year and are currently simply bad buys.
Ocugen’s share price rose more than 260% in 2021 as the S&P 500 has only increased by 17%. The surge was fueled by hope that Covaxin, the COVID-19 vaccine candidate that Ocugen is jointly developing with India’s Bharat Biotech, will generate significant revenue for the Health company. The good news is that the results look promising – Ocugen reported in July that Phase 3 results showed Covaxin was over 93% effective in preventing severely symptomatic cases of COVID-19.
But even if Delta variant cases increase, meaning that another vaccine might still be needed in the US, it still may not mean much market share for Ocugen. Under the agreement with Bharat, Ocugen will receive 45% of the profits generated in the US and Canadian markets. In these countries, vaccination rates are among the highest in the world – more than 50% of people have already received at least one dose of a vaccine. And in the US, the company is no longer seeking emergency approval from the Food and Drug Administration (FDA), as the agency has proposed filing a license application for biologics instead. This is a lengthy process that could mean Covaxin will not be available for several months.
Buying a stock based on a trend like COVID-19 can be risky as things change quickly. Although the US economy has reopened in many places, there is a risk of further restrictions as the number of cases increases. It’s hard to predict how long this pandemic will last. And in the midst of this uncertainty, Ocugen investors quickly sold the stock. Its stocks are down more than 40% in the past three months, while the S&P 500 is up more than 4% during that time.
The company had no revenue for the first three months of 2021, and investors who still hold the stock are likely to bet on the success of its vaccine candidate. Ocugen doesn’t have much in the pipeline, and while Covaxin may make some revenue for the company if it gets OK from health officials in Canada or the US (which is by no means a guarantee), it’s just not a great place to invest your money right away. There are better and safer ways so that you last for the long term.
2. TAL training
China-based tutoring company TAL Education seemed like a promising investment at some point, with sales of $ 4.5 billion in 2021, up 37% from last year.
But despite this impressive growth, investing in this business is even riskier than buying Ocugen stock. And that’s because the Chinese government is cracking down on tutoring companies to cut costs for parents. In July, Reuters reported that the country would ban for-profit tuition in “core school subjects”.
While many investors prepared for some restrictions, such sluggish ones came as a shock. TAL Education stocks are now down a staggering 90% in just three months. Brokers have slashed their price targets on the stock to below $ 9 (previously, some expected them to go as high as $ 85).
Presumably, TAL Education will still be able to make a profit in non-core subjects, but even in the best case scenario, the sum will only be a fraction of what it generated before. Analysts out City group say the restrictions for industry leaders could mean a 70% drop in sales for kindergarten through 12th grade (the main focus of TAL Education).
TAL Education appears to have been taken by surprise by these recent developments, so it has canceled the scheduled release of its earnings report for the first quarter, previously slated for August 5th. The stock is an incredibly risky investment right now. and it’s just not worth taking a chance – even with free money.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.