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It has been quite the few months for stock markets on both sides of the pond. The FTSE 100 has repeatedly hit new highs in 2025. The S&P 500 over in New York has also broken its own record high.
But while the stock market has been doing well, there are quite a few shares I am actively avoiding. Here are three of them.
Palantir Technologies
First up, Palantir Technologies (NASDAQ: PLTR). Up 1,844% in five years, Palantir stock has been a star performer in recent years.
The company’s specialism in harnessing powerful insights from big data has helped it land contracts with a welter of clients around the globe. The longer they stick with Palantir, the more reliant I expect them to become on its technology. That gives the company substantial pricing power.
Over time, this could turn out to be a highly profitable business model. But there are a few things that put me off adding Palantir stock to my portfolio.
One is that I am not sure I fully understand its technology, which makes it hard for me to assess how sustainable its competitive advantage is.
Another is valuation. Selling for 594 times earnings, the company looks wildly overvalued to me.
Can it possibly deserve its $424bn stock market capitalisation? Time will tell.
Carvana
Compared to that, the price-to-earnings (P/E) ratio of just under 100 at Carvana (NYSE: CVNA) may look less stretched. Still, that sort of dizzying valuation multiple looks far too expensive for me.
Carvana has had an incredible few years from an investment perspective. In 2021, its share price touched $360. By the start of 2023, it had fallen under $5 a share – but has since bounced back to over $400 a share at its high point over the past year.
Why so much volatility?
Carvana’s model of buying, selling and financing used cars helps it tap into a huge market. If it can become the dominant digital platform in that space, the opportunity is massive.
But this is an area where careful car price and creditworthiness assessment is crucial. The recent collapse of US subprime car loan specialist Tricolor may be an early warning sign that the wider car financing industry could start to wrestle with higher delinquency rates from borrowers. That may be bad for Carvana.
Ocado
It is not only Stateside that some stock market valuations are making me nervous.
I continue to avoid UK digital retailer and ecommerce platform vendor Ocado (LSE: OCDO).
The Ocado share price is down 31% this year. That headline figure obscures another volatile ride. Between July and August it soared almost 70%, before since crashing back to earth.
The reason? Ongoing uncertainty about whether the company’s business model can start to generate free cash flow consistently.
Ocado said over the summer that it expects to turn cash flow positive next year.
If it achieves that – and keeps doing so – I think the share price could soar. Its installed client base and bespoke technology should help it along the way.
But the company has been a money pit for so long that I will not be putting a penny into it just on the strength of a business projection. I would first like it to achieve free cash flows before even thinking about investing.
