Popular stocks are popular for a reason. Whether the growth is due to macroeconomic factors or charismatic leadership, these publicly traded companies have something going for them to pique investor interest. That said, popular stocks also have exposure to risks that the lesser popular names don’t have.
In stock market investing, high-growth potential accompanies a higher capital risk. If the underlying company falls out of favour, it can lead to significant downturns. Today, I will discuss five ultra-popular stocks that are riskier than an average stock.
Shopify (TSX:SHOP) appears to be returning to all-time highs and reclaiming its position as the largest company by market capitalization in Canada. It lost the spot after declining by over 70% last year. However, 2023 has been a better year for the beleaguered tech stock.
As of this writing, the $96.88 billion market capitalization e-commerce company headquartered in Ottawa is up by 54.89% year to date. After jumping by almost 40% between May 2 and July 31, 2023, it went through a sharp decline, highlighting its volatility.
Shopify’s platform is an outstanding product that might make the stock relevant for years. However, risk-averse investors might want to practice more caution if they allocate funds to the stock.
Air Canada (TSX:AC) is an airline stock that went against typical trends by delivering market-beating returns for a long time. When the pandemic struck, it entered an unprecedented environment that erased years of gains. With conditions improving, Air Canada stock has regained momentum.
As of this writing, Air Canada trades for $22.32 per share. While up by 16.74% year to date, it is down by over 56% from its all-time high. A return to all-time highs could deliver substantial wealth growth through capital gains, although it may take time. That said, it is a market leader in its industry and will likely dominate the Canadian airline sector for a while.
WELL Health Technologies (TSX:WELL) became highly popular amid the pandemic boom. The $1.03 billion market capitalization leader in the Canadian telehealth space also owns and operates the largest network of Canadian outpatient health clinics. After a surge in popularity, it fell out of favour.
As of this writing, WELL Health Technologies stock trades for $4.33 per share, up by 54.09% year to date. However, it is down by over 50% from its all-time highs. Due to the growing popularity of telehealth services, there is a lot more growth potential. While it has delivered a multi-bagger performance since its debut in 2016, it might warrant caution to invest in.
Amazon (NASDAQ:AMZN) is one of the most popular stocks worldwide and one of the most widely owned stocks. Doing over $500 billion in annual revenue and having a celebrity businessman like Jeff Bezos makes its popularity unsurprising.
A closer look at its core retail business highlights a few issues. As popular as the company is, it is not always profitable. Even after becoming profitable, it has had its fair share of losses in a few recent quarters.
The exciting news centred on the integration of artificial intelligence into its offerings presents significant growth potential for the stock. As of this writing, Amazon stock trades for US$133.26 per share, up by 55.28% year to date but down by 7.22% from all-time highs.
Coinbase Global (NASDAQ:COIN) is another stock that presents a significant degree of capital risk. The company runs the most popular cryptocurrency exchange in the United States. 2021 saw the company go public. That year, 93% of its revenue came through cryptocurrency trading transaction fees.
From the second quarter (Q2) of fiscal 2021 through Q2 fiscal 2023, the picture has changed completely. Its trading volumes declined from US$462 billion in Q2 2021 to US$92 billion in Q2 2023. Its transaction-based revenue is unpredictable due to the nature of its industry. It trades for $74.26 per share at writing, down by 35.10% from its 52-week highs.
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For many investors, making money in the stock market involves buying low and selling high. If everybody invests in a popular stock, how can it rise higher? Ultimately, popular and unpopular stocks can deliver stellar returns. However, popular stocks tend to be more expensive than less-popular peers.
While not necessarily bad buys, these five stocks merit more caution than their cheaper peers. Among these, WELL Health Technologies stock might be the least-risky investment.
The post Proceed With Caution When Considering These 5 Ultra-Popular Stocks appeared first on The Motley Fool Canada.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolâs board of directors. Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Amazon.com and Coinbase Global. The Motley Fool has a disclosure policy.