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5 Stocks to Avoid

These no-moat, high-uncertainty stocks are overpriced today.

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At Morningstar, we spend a lot of time talking about wide-moat, low-uncertainty stocks. When selling at a reasonable price, these stocks are what we call "fat pitches": companies with predictable earnings and long-term staying power trading at significant margins of safety. Invest in these stocks when they're undervalued and, over the long term, you're almost sure to accumulate wealth.

At the opposite end of the spectrum lie stocks that investors shouldn't touch: no-moat, high-uncertainty companies trading well above their worth. As we've noted before, there can be plenty of reasons to invest in a low-quality, high-uncertainty stock--but these stocks require deep discounts to fair value to compensate for their risks.

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Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.