Some investors are delusional…
Rivian Automotive Inc (RIVN), the electric car company Amazon has a stake in, is now up 114% since May 1.
It launched with such hype that, at one point, it was worth $150 billion.
With no sales.
That’s maddening. And certainly dangerous to your portfolio.
But the more wild-eyed speculators you see striking it rich quickly, the more you may be tempted to follow suit.
Today, I’ll show why this FOMO (fear of missing out) market is a potential minefield. One that could blow your retirement dreams out of the water if you’re not careful.
I’ll also show you a better way to build wealth than buying Rivian and other speculative stocks.
Playing Catch-Up Just to Break Even
Although it’s up 114% since May of this year…
Don’t be fooled.
Rivian fell as much as 90% in 2022.
And almost everyone who bought it prior to this year is down significantly.
In fact, they may never recover their losses.
Based on the percentage they lost, Rivian would have to go up by much more just for them to recover their money.
Below is what it would take to recover each loss by percentage.
Rivian was such a hyped stock that, even today, some investors are down 84% after its monster rally.
That means they would need Rivian to quadruple just to break even as you can see from the table above.
How likely is that to happen?
Well, this year Rivian is expected to sell 50,000 cars for $4 billion.
And in 2028, it’s expected to sell 450,000 cars for $35 billion.
But even with almost 500,000 vehicle deliveries – 10 times what it’s expected to hit this year… Five years from now, Rivian is expected to lose $640 million.
Last year, Rivian had $1.2 billion in debt. And by 2028 – a year when it’s still expected to lose $640 million – its cumulative debt is expected to be almost $8 billion.
If Rivian misses a debt payment, it will file for bankruptcy. And shareholders will get wiped out.
In 2026 and 2029, it will either come up with almost $3 billion in cash to repay bond investors… Or it will repay the debt with new stock. That will dilute shareholders and make the stock worth less.
And guess what’s likely coming in 2024 that could derail Rivian’s plans to sell 92,000 cars at an average price of $87,000 each?
A recession that the bond market says is 100% likely by no later than July 31st of next year.
Even if it’s a mild recession, it’s hard to imagine that rich people won’t pull back on $87,000 luxury land yachts when their portfolios tanked in a recessionary bear market.
The Safer Way to Earn Big Returns
Speculative investments are not the only way to see 114% gains. And they’re certainly not the way to hold on to those gains.
In our Intelligent Income Investor service, we initially recommended Broadcom (AVGO) at $200 per share in 2020.
Broadcom is a semiconductor stock that has become one of the fastest-growing dividend stocks in the entire market. And is now trading at $889 per share as of writing this.
Those are gains of about 370%. Even if you got in when we re-launched our service in October 2022, that’s still a gain of 193%.
Broadcom is a great example of a reliable stock whose growth is powered by fundamentals – and not speculation. Even better, investors have been able to earn a steady, and increasing, dividend through bull and bear markets.
Broadcom is currently out of our recommended buy range. But we have other incredible blue-chip stocks in our portfolio that we still consider buys.
One is a dividend king with a 62-year dividend growth streak that is up 260%.
And the other is a world-famous dividend stock with products in every phone, that’s up 130%.
If you’re feeling jealous of folks who scored big on a speculative play… Remember that they’re about to experience some major losses they likely won’t be able to recover from.
Meanwhile if you are interested in joining our Intelligent Income Investor service, it’s chock-full of sleep well at night (SWAN) stocks that can bring you safe 100%, 200%, or even 400% gains.
Not from crypto or some speculative company. But from the world’s most dependable long-term growth companies.
You can build your wealth without risking your hard-earned money on hyped-up speculative stocks like Rivian.
Analyst, Intelligent Income Daily