Picture supply: Getty Pictures
It has been fairly the few months for inventory markets on each side of the pond. The FTSE 100 has repeatedly hit new highs in 2025. The S&P 500 over in New York has additionally damaged its personal document excessive.
However whereas the inventory market has been doing properly, there are fairly a number of shares I’m actively avoiding. Listed here are three of them.
Palantir Applied sciences
First up, Palantir Applied sciences (NASDAQ: PLTR). Up 1,844% in 5 years, Palantir inventory has been a star performer in recent times.
The corporate’s specialism in harnessing highly effective insights from massive knowledge has helped it land contracts with a welter of purchasers across the globe. The longer they persist with Palantir, the extra reliant I anticipate them to turn into on its expertise. That provides the corporate substantial pricing energy.
Over time, this might develop into a extremely worthwhile enterprise mannequin. However there are some things that put me off including Palantir inventory to my portfolio.
One is that I’m not positive I totally perceive its expertise, which makes it laborious for me to evaluate how sustainable its aggressive benefit is.
One other is valuation. Promoting for 594 instances earnings, the corporate seems wildly overvalued to me.
Can it presumably deserve its $424bn inventory market capitalisation? Time will inform.
Carvana
In comparison with that, the price-to-earnings (P/E) ratio of just below 100 at Carvana (NYSE: CVNA) might look much less stretched. Nonetheless, that type of dizzying valuation a number of seems far too costly for me.
Carvana has had an unbelievable few years from an funding perspective. In 2021, its share worth touched $360. By the beginning of 2023, it had fallen below $5 a share – however has since bounced again to over $400 a share at its excessive level over the previous 12 months.
Why a lot volatility?
Carvana’s mannequin of shopping for, promoting and financing used automobiles helps it faucet into an enormous market. If it might turn into the dominant digital platform in that area, the chance is huge.
However that is an space the place cautious automotive worth and creditworthiness evaluation is essential. The latest collapse of US subprime automotive mortgage specialist Tricolor could also be an early warning signal that the broader automotive financing trade might begin to wrestle with larger delinquency charges from debtors. Which may be unhealthy for Carvana.
Ocado
It’s not solely Stateside that some inventory market valuations are making me nervous.
I proceed to keep away from UK digital retailer and ecommerce platform vendor Ocado (LSE: OCDO).
The Ocado share worth is down 31% this 12 months. That headline determine obscures one other risky trip. Between July and August it soared nearly 70%, earlier than since crashing again to earth.
The explanation? Ongoing uncertainty about whether or not the corporate’s enterprise mannequin can begin to generate free money stream constantly.
Ocado stated over the summer time that it expects to show money stream optimistic subsequent 12 months.
If it achieves that – and retains doing so – I feel the share worth might soar. Its put in consumer base and bespoke expertise ought to assist it alongside the way in which.
However the firm has been a cash pit for thus lengthy that I can’t be placing a penny into it simply on the energy of a enterprise projection. I’d first prefer it to attain free money flows earlier than even serious about investing.
