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Special Report

Stocks to Avoid

At Morningstar, we pride ourselves on calling investments as we see them. As an independent research firm, we provide unbiased viewpoints on thousands of stocks and mutual funds. While this breadth of market coverage allows us to frequently highlight investments that we believe will be top performers over the long haul, we're equally as focused on helping our customers steer clear of bad choices.

Regular Morningstar readers may remember our last article highlighting a group of high-profile investments we thought should be avoided. As with that list, we've chosen another group of stocks that we believe investors also should take a pass on.

Some of these are troubled companies with futures so bleak that we believe the risk is too great to justify buying the shares, even at current beaten-down prices. Others on this list are just so expensive relative to their earnings prospects that we believe a stock plunge could be on the horizon.

 Krispy Kreme : This delicious doughnut maker has investors in a glaze haze. Our advice: Indulge in the fried goodies, but skip the stock.

 UAL (UAL): United Airlines' parent isn't likely to take off until it can fix its numerous problems.

 Eastman Kodak EK: A delay in going digital has left this company feeling like a roll of 110 film when 35mm took over the world.

 Bank of America  (BAC): Poor execution, a lack of checks and balances, and an expensive deposit strategy limit this bank's chances of success.

 SAP (SAP): This software maker has executed well, but its stock is too expensive to touch.

 Gateway  : Sluggish demand, a PC price war, and a weak foothold in corporate America have made shrinking margins and weak sales all too common in Gateway Country.

 Xerox (XRX): A series of crises has left this copier company with an unclear future.

 Best Buy (BBY): This retailer's VCRs, TVs, and computers might be good buys, but we don’t think its stock is.

 Yahoo  : Despite this stock's fall from grace, there's little reason to think the Internet party will start up again soon.

 Conseco (CNC): Even assuming good growth, this insurer looks pricey. Now that risk is rising with a spike in defaults on trailer-home loans, investors might want to take their money elsewhere.

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