3 Inflated Stocks We Steer Clear Of

Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.

While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here are three stocks getting more buzz than they deserve and some you should buy instead.

Knowles (KN)

One-Month Return: +13.3%

With roots dating back to 1946 and a focus on components that must perform flawlessly in critical situations, Knowles (NYSE:KN) designs and manufactures specialized electronic components like high-performance capacitors, microphones, and speakers for medical technology, defense, and industrial applications.

Why Do We Avoid KN?

1. Annual sales declines of 4.9% for the past five years show its products and services struggled to connect with the market during this cycle
2. Smaller revenue base of $593.2 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Knowles is trading at $27.24 per share, or 21.9x forward P/E. Check out our free in-depth research report to learn more about why KN doesn’t pass our bar.

Aflac (AFL)

One-Month Return: +3.9%

Known for its iconic duck mascot that has quacked "Aflac!" in commercials since 2000, Aflac (NYSE:AFL) provides supplemental health and life insurance policies that pay cash benefits directly to policyholders for expenses not covered by their primary insurance.

Why Do We Pass on AFL?

1. Net premiums earned contracted by 6.2% annually over the last five years, showing unfavorable market dynamics this cycle
2. Operational productivity has decreased over the last two years as its combined ratio worsened by 10.8 percentage points
3. Estimated book value per share decline of 2.6% for the next 12 months implies a challenging profitability environment

Aflac’s stock price of $113.54 implies a valuation ratio of 2x forward P/B. If you’re considering AFL for your portfolio, see our FREE research report to learn more.

Stellar Bancorp (STEL)

One-Month Return: +21%

Created through strategic mergers to serve the growing Texas business community, Stellar Bancorp (NYSE:STEL) is a Texas bank holding company that provides commercial banking services primarily to small and medium-sized businesses and professionals.

Why Are We Out on STEL?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 4.2% annually over the last two years
2. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 35.6 basis points (100 basis points = 1 percentage point)
3. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable

At $38.58 per share, Stellar Bancorp trades at 1.1x forward P/B. Read our free research report to see why you should think twice about including STEL in your portfolio.

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.