2 famous stocks I would avoid in today's stock market

For every stock I like and want to own, there are many more I wouldn't buy for various reasons. Here are two of them that also happen to be household names.

Burberry

First of all, Burberry Group (LSE: BRBY), the global luxury fashion house and maker of the legendary trench coat. The share price has fallen by around 67% in the last five years!

Part of me thinks that this must be an overreaction. Yes, the FTSE100 The company's sales are falling, but so are almost every other brand in the luxury sector.

LVMHthe world's largest luxury group, just reported lower than expected sales for the first half of the year. The share price will fall by 10.5% in 2024.

Nevertheless, I notice that other luxury stocks are doing much better: Hermes International has increased by 8% since the beginning of the year, Richemont has increased by 15% and Ferrari (one of my top holdings) is up 20%.

But as Bernstein luxury analyst Luca Solca recently pointed out, Ferrari and Hermès are “are at the top of the price pyramid“ in their categories. They both sell less than the market demands. Much less.

With Burberry, I fear that the company's attempts to raise prices and move upmarket are doomed to failure, whether or not there is a downturn in the industry. Of course, I hope I'm wrong and maybe that's exactly the problem. I think I would only invest because it's a top British brand that's fallen on hard times. So essentially sentimentality.

But the hard facts are that the dividend has just been canceled and the fourth CEO in a decade is in the hot seat. Maybe he can still turn things around. He has a lot of experience in the industry.

In the short term, however, I am also concerned that the brand value could be damaged by unsold items ending up on the outlet market. That is too uncertain for me.

NVIDIA

Next we have NVIDIA (NASDAQ: NVDA), which has almost the opposite problem. Sales and profits are soaring as the company's chips power the ongoing artificial intelligence (AI) revolution.

As a result, its shares have moved in a completely opposite direction to Burberry's, rising 2,520% in five years!

Nvidia became a household name earlier this year when it briefly Apple And Microsoft to become the largest company in the world by market capitalization.

However, I would argue that Apple and Microsoft have far more diversified revenue streams, and if the AI ​​revolution suddenly went up in smoke, I would be much less concerned about their stock prices than Nvidia's.

Well, Nvidia is an incredible company and I've owned its stock for a long time. Its technology sits at the intersection of several powerful technological trends, from AI and self-driving cars to the metaverse.

The story continues

Additionally, Jensen Huang, the CEO and founder, is a true visionary. He is exactly the kind of leader I want for the companies I invest in.

However, competition is growing, especially from its largest customers, who are making their own AI chips to reduce dependence on Nvidia. And the stock price is geared toward robust future growth, which is not guaranteed every year.

From today's perspective, I think other AI stocks make more sense than Nvidia.

The post 2 Famous Stocks I’d Avoid in Today’s Market appeared first on The Motley Fool UK.

Further reading

Ben McPoland holds positions in Ferrari. The Motley Fool UK has recommended Apple, Burberry Group Plc, Microsoft and Nvidia. The views expressed on companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2024