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 overhyped stocks that may correct and some you should consider instead.
DigitalOcean (DOCN)
One-Month Return: +1.9%
Built for simplicity in a world of complex cloud solutions, DigitalOcean (NYSE: DOCN) provides a simplified cloud computing platform that enables developers and small businesses to quickly deploy and scale applications.
Why Are We Hesitant About DOCN?
- Average ARR growth of 14.2% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Net revenue retention rate of 99.2% shows it has a tough time retaining customers
- Sky-high servicing costs result in an inferior gross margin of 59.5% that must be offset through increased usage
DigitalOcean’s stock price of $49.20 implies a valuation ratio of 5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than DOCN.
AIG (AIG)
One-Month Return: +9.6%
With roots dating back to 1919 when it began as a small insurance agency in Shanghai, China, AIG (NYSE: AIG) is a global insurance organization that provides commercial and personal insurance solutions to businesses and individuals across more than 200 countries.
Why Do We Pass on AIG?
- 5.8% annual declines in net premiums earned for the past five years indicates policy sales struggled this cycle
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 1% annually
- Flat book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle
At $84.40 per share, AIG trades at 1.1x forward P/B. Read our free research report to see why you should think twice about including AIG in your portfolio.
Seacoast Banking (SBCF)
One-Month Return: -2.2%
Founded during the Florida land boom of 1926 and surviving the Great Depression, Seacoast Banking Corporation of Florida (NASDAQ: SBCF) is a financial holding company that provides commercial and retail banking, wealth management, and mortgage services throughout Florida.
Why Should You Dump SBCF?
- 1.5% annual revenue growth over the last two years was slower than its banking peers
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 1.5% annually while its revenue grew
- Projected tangible book value per share decline of 1.8% for the next 12 months points to tough credit quality challenges ahead
Seacoast Banking is trading at $31.62 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why SBCF doesn’t pass our bar.
Stocks We Like More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
