10 Most Dangerous Stocks To Avoid For 2025

The last decade has been pretty good for the stock market.

With the exception of the quickly corrected COVID sell-off, the market has moved pretty much in a straight path higher.

Technological innovations and Federal Reserve policy that was overly friendly have helped drive annual gains of over 13% on average over the past ten years. That is one of the best ten-year periods in the history of the US stock market.

There was a group of stocks, however, that did not participate in the rally. When the market went up, these stocks did not keep pace. During periods of profit-taking and correction, these stocks went down more than the market.

Buying the dip in these stocks became an exercise in catching falling knives. Many of the stocks that made this list were usually popular stocks that investors and traders loved and expected to go up forever.

Not all of them went down. Some went down and recovered. Others went to zero, or something really close to it.

If you had owned the top ten stocks that fit the criteria used to identify the potential losers, you lost money over the past ten years. Investors who bet against these stocks made a lot of money, although the volatility required in the effort probably required massive doses of Pepto to get through the decade.

Had you bought stocks that fit the criteria over the past 25 years, you would have averaged a loss of 15% annually. Basically, you would have gone broke six times while everyone else was making money.

The criteria are simple: You want to avoid or bet against stocks that are trading at more than 10 times sales that have rising short interest. Check the short interest every month so you can add any new candidates. If you are going to bet against these stocks, focus on the ten with the highest short interest.

Short sellers get a bad rap as they are usually betting against stocks that everyone loves. Shorts have been blamed for everything from corporate bankruptcies to market crashes and everything in between. In truth, most of them are smart folks who have done their homework. They have to be, since they are basically fighting centuries of upward drift in economies and markets.

Short sellers low on IQ points or lacking the courage of their convictions are usually carried out of the arena on their shield in short order. If the short sellers are continuing to add to their positions, they have a high degree of conviction that the stock is headed lower for fundamental reasons.

Usually, there are a few stocks everyone loves on the list. The fact that you love a stock does not mean it cannot go down. The evidence suggests that owning stocks that fit the criteria is too risky to hold until the short interest begins falling or the valuation improves.

As we prepare to enter 2025, optimism is high. We have a new President coming into office, and the general perception is that his administration will be pro-business. The Trump administration is expected to keep taxes low and roll back many of the anti-competitive and restrictive regulations that the current crew put in place.

I own a ton of banks, small-cap stocks, and REITs, so I certainly hope that turns out to be the case. If, however, we do see a correction or interest rates spike higher because of tariffs or political tension, I do not want to own shares of companies that are likely to lead the way lower.

There are stocks on this list that everybody loves and thinks are going to the moon. They might, but the empirical evidence suggests that there is a strong possibility the price moves lower.

Here are the ten stocks that fit the criteria and should probably be avoided as we go into 2025:

1. Palantir Technologies (PLTR): This stock has been spectacular the last six months. You would think that shorts would have thrown in the towel, but they are building a bigger position as it goes higher.
2. SoundHound AI (SOUN):Artificial intelligence is the next big thing. That does not mean all AI stocks are going to the moon. With no profits and trading at 50 times revenues, this stock is priced for perfection squared.
3. Broadcom (AVGO):Argue with the computer, not me. Broadcom is a fantastic company, but at 17 times revenue, it is vulnerable in a correction.
4. Uranium Energy (UEC): I am bullish on uranium. This may be a long-term winner, but as of this moment in time, the numbers suggest the shares could tumble before they go higher.
5. Rocket Lab USA (RKLB): Rocket Lab is a space stock with 54 low-orbit satellites launched so far. They may be good at launching rockets, but so far they have not made any money from it.
6. AST SpaceMobile (ASTS): Another space stock with a great story and no profits.
7. Roblox Corporation (RBLX): This has been a hot stock this year, but the formula suggests that this might be a time for caution.
8. C3.ai Inc (AI): AI is fantastic. 11 times sales with no profits might not turn out to be as wonderful.
9. MicroStrategy (MSTR): Everyone loves bitcoin right now. If it stops going up, MicroStrategy could crater.
10. AppLovin (APP): Everybody loves this stock. Except the short sellers. They keep piling on.

These are the top ten potentially dangerous stocks for 2025. They might keep going up, but the model says they are vulnerable to at least a pullback.

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