Volatility cuts both ways - while it creates opportunities, it also increases risk, making sharp declines just as likely as big gains. This unpredictability can shake out even the most experienced investors.

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.

Applied Materials (AMAT)

Rolling One-Year Beta: 1.53

Founded in 1967 as the first company to develop tools for other businesses in the semiconductor industry, Applied Materials (NASDAQ: AMAT) is the largest provider of semiconductor wafer fabrication equipment.

Why Are We Cautious About AMAT?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.8% for the last two years
2. Estimated sales decline of 1.6% for the next 12 months implies a challenging demand environment
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.7 percentage points

Applied Materials’s stock price of $173.50 implies a valuation ratio of 17.7x forward P/E. Check out our free in-depth research report to learn more about why AMAT doesn’t pass our bar.

Icahn Enterprises (IEP)

Rolling One-Year Beta: 1.12

Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.

Why Is IEP Not Exciting?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9.8% annually over the last two years
2. Gross margin of 8.5% reflects its high production costs
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

At $8.16 per share, Icahn Enterprises trades at 0.4x forward price-to-sales. Read our free research report to see why you should think twice about including IEP in your portfolio.

Fortune Brands (FBIN)

Rolling One-Year Beta: 1.15

Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE: FBIN) makes plumbing, security, and outdoor living products.

Why Should You Dump FBIN?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Performance over the past two years shows each sale was less profitable, as its earnings per share fell by 9.5% annually
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.4 percentage points

Fortune Brands is trading at $59.79 per share, or 14.7x forward P/E. If you’re considering FBIN for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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