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Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.

Choosing the wrong investments can cause you to fall behind, which is why we started StockStory - to separate the winners from the losers. Keeping that in mind, here are three low-volatility stocks to steer clear of and a few better alternatives.

Redfin (RDFN)

Rolling One-Year Beta: 0.81

Founded by a former medical school student, electrical engineer, and Amazon data engineer, Redfin (NASDAQ:RDFN) is a real estate company offering brokerage services through an online platform.

Why Are We Out on RDFN?

1. Demand for its offerings was relatively low as its number of partner transactions has underwhelmed

2. Earnings per share fell by 14.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

3. Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly

Redfin is trading at $9.87 per share, or 75.6x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why RDFN doesn’t pass our bar.

ADT (ADT)

Rolling One-Year Beta: 0.59

Founded in 1874 and headquartered in Boca Raton, Florida, ADT (NYSE:ADT) is a provider of security, automation, and smart home solutions, offering comprehensive services for home and business protection.

Why Are We Wary of ADT?

1. Demand for its offerings was relatively low as its number of customers has underwhelmed

2. Projected sales growth of 4.3% for the next 12 months suggests sluggish demand

3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $8.51 per share, ADT trades at 9.9x forward P/E. If you’re considering ADT for your portfolio, see our FREE research report to learn more.

Middleby (MIDD)

Rolling One-Year Beta: 0.95

Holding a Guinness World Record for creating the world’s fastest conveyor pizza oven, Middleby (NYSE:MIDD) is a food service and equipment manufacturer.

Why Do We Steer Clear of MIDD?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy

2. Projected sales growth of 2.3% for the next 12 months suggests sluggish demand

3. Earnings per share lagged its peers over the last two years as they only grew by 2.7% annually

Middleby’s stock price of $149.91 implies a valuation ratio of 15x forward P/E. To fully understand why you should be careful with MIDD, check out our full research report (it’s free).