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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 nicely, there are fairly a couple 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 lately.
The corporate’s specialism in harnessing highly effective insights from large knowledge has helped it land contracts with a welter of shoppers across the globe. The longer they stick to Palantir, the extra reliant I count on them to turn out to be on its expertise. That provides the corporate substantial pricing energy.
Over time, this might turn 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 onerous for me to evaluate how sustainable its aggressive benefit is.
One other is valuation. Promoting for 594 occasions 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 slightly below 100 at Carvana (NYSE: CVNA) could look much less stretched. Nonetheless, that kind of dizzying valuation a number of seems far too costly for me.
Carvana has had an unimaginable few years from an funding perspective. In 2021, its share value 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 yr.
Why a lot volatility?
Carvana’s mannequin of shopping for, promoting and financing used vehicles helps it faucet into an enormous market. If it will probably turn out to be the dominant digital platform in that house, the chance is huge.
However that is an space the place cautious automotive value and creditworthiness evaluation is essential. The current 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 increased delinquency charges from debtors. That could be dangerous 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 value is down 31% this yr. That headline determine obscures one other unstable journey. 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 circulate constantly.
Ocado stated over the summer season that it expects to show money circulate optimistic subsequent yr.
If it achieves that – and retains doing so – I believe the share value might soar. Its put in shopper base and bespoke expertise ought to assist it alongside the best way.
However the firm has been a cash pit for thus lengthy that I cannot be placing a penny into it simply on the power of a enterprise projection. I might first prefer it to attain free money flows earlier than even fascinated about investing.
