3 Hyped Up Stocks We Approach with Caution

The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. All that said, here are three stocks getting more buzz than they deserve and some you should buy instead.

Resideo (REZI)

One-Month Return: +21.4%

Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.

Why Does REZI Fall Short?

1. Estimated sales growth of 2.4% for the next 12 months implies demand will slow from its two-year trend
2. Low free cash flow margin of 3.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Resideo is trading at $41.33 per share, or 15x forward EV-to-EBITDA. If you’re considering REZI for your portfolio, see our FREE research report to learn more.

Rivian (RIVN)

One-Month Return: +15%

The manufacturer of Amazon’s delivery trucks, Rivian (NASDAQ:RIVN) designs, manufactures, and sells electric vehicles and commercial delivery vans.

Why Is RIVN Not Exciting?

1. Negative 49.3% gross margin means it loses money on every sale and must pivot or scale quickly to survive
2. Negative free cash flow raises questions about the return timeline for its investments
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $15.60 per share, Rivian trades at 3.1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than RIVN.

BrightSpring Health Services (BTSG)

One-Month Return: +15.6%

Founded in 1974, BrightSpring Health Services (NASDAQ:BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.

Why Are We Wary of BTSG?

1. Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 2.4 percentage points
2. Earnings per share have contracted by 49.3% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
3. Free cash flow margin dropped by 5.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up

BrightSpring Health Services’s stock price of $27.39 implies a valuation ratio of 27.9x forward P/E. Check out our free in-depth research report to learn more about why BTSG doesn’t pass our bar.

Stocks We Like More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

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