The stocks featured in this article have all approached their 52-week highs. When these price levels hit, it typically signals strong business execution, positive market sentiment, or significant industry tailwinds.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here are three overhyped stocks that may correct and some you should consider instead.
Caterpillar (CAT)
One-Month Return: +0.4%
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE:CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Are We Cautious About CAT?
- 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
- Projected sales growth of 4.4% for the next 12 months suggests sluggish demand
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2.7% annually
At $407.40 per share, Caterpillar trades at 20.5x forward P/E. Check out our free in-depth research report to learn more about why CAT doesn’t pass our bar.
Lemonade (LMND)
One-Month Return: +30.4%
Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE:LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.
Why Are We Wary of LMND?
- Earnings per share were flat over the last four years and fell short of the peer group average
- Annual book value per share declines of 183% for the past five years show its capital management struggled during this cycle
- Negative return on equity shows management lost money while trying to expand the business
Lemonade is trading at $52.50 per share, or 8.4x forward P/B. Read our free research report to see why you should think twice about including LMND in your portfolio.
Butterfield Bank (NTB)
One-Month Return: -3.9%
Founded in 1784 as one of the oldest banks in the Western Hemisphere, Butterfield Bank (NYSE:NTB) provides banking, wealth management, and trust services to individuals and businesses in select offshore financial centers including Bermuda, Cayman Islands, and the Channel Islands.
Why Are We Hesitant About NTB?
- Net interest income trends were unexciting over the last five years as its 1.4% annual growth was below the typical bank company
- Estimated net interest income decline of 42.5% for the next 12 months implies a challenging demand environment
- Net interest margin of 2.7% is well below other banks, signaling its loans aren’t very profitable
Butterfield Bank’s stock price of $44.90 implies a valuation ratio of 1.6x forward P/B. Dive into our free research report to see why there are better opportunities than NTB.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% 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
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