A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.
At StockStory, our job is to help you avoid costly mistakes and stay on the right side of the trade. Keeping that in mind, here are three volatile stocks to avoid and some better opportunities instead.
Analog Devices (ADI)
Rolling One-Year Beta: 1.57
Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ: ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.
Why Does ADI Worry Us?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 12.7% annually over the last two years
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.3 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $250 per share, Analog Devices trades at 31.3x forward P/E. Check out our free in-depth research report to learn more about why ADI doesn’t pass our bar.
Compass (COMP)
Rolling One-Year Beta: 1.22
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE: COMP) is a digital-first company operating a residential real estate brokerage in the United States.
Why Does COMP Give Us Pause?
- Demand for its offerings was relatively low as its number of principal agents has underwhelmed
- Historical operating margin losses point to an inefficient cost structure
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Compass’s stock price of $6.42 implies a valuation ratio of 14.7x forward P/E. To fully understand why you should be careful with COMP, check out our full research report (it’s free).
Root (ROOT)
Rolling One-Year Beta: 1.25
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Why Are We Hesitant About ROOT?
- Annual book value per share declines of 162% for the past five years show its capital management struggled during this cycle
- Negative return on equity shows that some of its growth strategies have backfired
Root is trading at $124.69 per share, or 4.9x forward P/B. Dive into our free research report to see why there are better opportunities than ROOT.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
