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Special Report

Stocks to Avoid

It's hard to justify these high prices.

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When markets turn volatile, it can be increasingly difficult for investors to know which end is up. A stock that was undervalued in late September when the market bottomed might be overpriced today. Some highly leveraged companies might be great performers in a good economy. But in a recession, when their cash flows dry up--and the debt payments get hard to make--they might not look nearly as attractive.

In some cases, the choices are more clear-cut. Some companies like the five we're highlighting below are respected leaders in their industry segments. These companies have a lot going for them, whether it's strong growth, wide margins, or esteemed brand names. However, despite all their competitive advantages, the Morningstar analysts who track these stocks don't think they have enough going for them to justify their high prices, making them stocks to avoid.

Craig Woker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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