These Overvalued Stocks Have Plenty of Room to Fall
Why investors should be wary of a refiner and financial-services stock trading well above our fair value estimates.
On the Nov. 2, 2026, episode of The Morning Filter podcast, guest host Sarah Hansen and Morningstar Chief US Market Strategist Dave Sekera discuss why Valero VLO and Robinhood HOOD stocks are sells today. Here is an excerpt from the show.
Why We Think Refining Stocks Have Run Too Far
Sarah Hansen: You’ve brought us three stocks to sell and three stocks to buy for the month. Let’s start with your sell recommendations. You have Valero, and refiners in general, it sounds like. Why do you recommend investors take a step back there?
David Sekera: Yeah. All the refiners are trading well into overvalued territory. I picked Valero as really just an example here. It’s a 2-star-rated stock, trades at a 68% premium, but even Phillips 66 PSX, also a 2-star-rated stock at a 50% premium; HF Sinclair DINO is a 2-star-rated stock at a 32% premium. Marathon Petroleum MPC is a 1-star-rated stock at an 88% premium. They’ve all just run way too far in our minds when we think about the long-term intrinsic valuation of these companies.
What’s happened here in the short term, because of a lot of global conflicts, just because of how refiners in certain areas of the world have been shut down or might be under maintenance, or local governments really trying to keep refining capacity low within their own countries, global refining capacity has been pretty constrained. I think what’s happened is that, because of that, the normal flows have also been disrupted as far as how those refined products flow from one country to another, especially with everything else going on with Russia and Ukraine and in the Middle East right now. What we’ve seen is that US refiners in general have been actually very well positioned to capitalize on these global market disruptions, which has kept supply for the refined products relatively low, and of course then has bumped up the margins to record levels.
Now, looking specifically at the refiners, our team has noted that those on the West Coast have really been the most insulated from crude supply disruptions and at the same time have been the ones that have been able to benefit the most from the high margins and the exceptionally wide crack spreads. While these companies are making just exceptionally high margins for now, refining in and of itself is a very cyclical business and has very high fixed-cost leverage. Of course, that fixed-cost leverage works great to the upside, but then again, it’ll also work against, you know, to the downside. Once the cycle starts to normalize at that point, then I think these stocks probably have a lot of downside.
Why Robinhood Stock Is Still a Sell
Hansen: OK, so some risk there. Second on our list is Robinhood. I don’t know what the opposite of pounding the table is, but that’s what you were doing on Robinhood. The stock has been on your sell list a bunch of times. Why do you still feel so strongly?
Sekera: Yeah, so we recommended the sell on the Oct. 5 episode of The Morning Filter. It’s down over 25% since then. We also reiterated that sell on the Oct. 12 episode of The Morning Filter when we were specifically identifying stocks to do tax-loss harvesting on. Even with this one having fallen as much as it has, it’s still a 44% premium to our fair value, still a 2-star-rated stock. I mean, one of the more overvalued stocks across our coverage. I still think that to get even just to our
Again, if there’s any kind of hiccup in those types of expectations, then our fair value’s at risk, much less the stock trading that much above our fair value as it is. With revenue coming in later than expected, a growth story that really accelerates pressure to the downside. I think that the company overall is probably in a pretty tough market position because, of course, a company like this makes the most money, makes the most margin on people who are trading short-term trades or even day trading. In a market where it’s necessarily trading to the downside—and who knows where we trade from here—if the market has further to fall, typically you see a lot less of that type of trading activity.
Subscribe to The Morning Filter on Apple Podcasts, or wherever you get your podcasts, and keep up with the latest research from hosts Susan Dziubinski and David Sekera, and guest host Sarah Hansen, on Morningstar.com.
3 Stocks to Sell and 3 Stocks to Buy for November
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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