A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.

Choosing the wrong investments can cause you to fall behind, which is why we started StockStory - to separate the winners from the losers. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.

Dollar Tree (DLTR)

Rolling One-Year Beta: 0.70

A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ: DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.

Why Do We Think Twice About DLTR?

1. Annual sales growth of 1.1% over the last six years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
2. Forecasted revenue decline of 21.7% for the upcoming 12 months implies demand will fall off a cliff
3. 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

Dollar Tree is trading at $115.50 per share, or 21.4x forward P/E. Read our free research report to see why you should think twice about including DLTR in your portfolio.

Playa Hotels & Resorts (PLYA)

Rolling One-Year Beta: 0.48

Sporting a roster of beachfront properties, Playa Hotels & Resorts (NASDAQ: PLYA) is an owner, operator, and developer of all-inclusive resorts in prime vacation destinations.

Why Does PLYA Worry Us?

1. Revenue per room has underperformed over the past two years, suggesting it may need to develop new facilities
2. Estimated sales growth of 7.6% for the next 12 months is soft and implies weaker demand
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

At $13.48 per share, Playa Hotels & Resorts trades at 21.7x forward P/E. If you’re considering PLYA for your portfolio, see our FREE research report to learn more.

Encompass Health (EHC)

Rolling One-Year Beta: 0.63

With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE: EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.

Why Are We Hesitant About EHC?

1. Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 4 percentage points
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.2 percentage points

Encompass Health’s stock price of $107.17 implies a valuation ratio of 21.8x forward P/E. To fully understand why you should be careful with EHC, check out our full research report (it’s free).

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.

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