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A highly volatile stock can deliver big gains - or just as easily wipe out a portfolio if things go south. While some investors embrace risk, mistakes can be costly for those who aren’t prepared.

At StockStory, our job is to help you avoid costly mistakes and stay on the right side of the trade. That said, here are three volatile stocks to avoid and some better opportunities instead.

Texas Instruments (TXN)

Rolling One-Year Beta: 1.11

Headquartered in Dallas, Texas since the 1950s, Texas Instruments (NASDAQ:TXN) is the world’s largest producer of analog semiconductors.

Why Does TXN Worry Us?

1. Annual sales declines of 9.3% for the past two years show its products and services struggled to connect with the market during this cycle

2. Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 8.4 percentage points

3. 32.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Texas Instruments is trading at $165.08 per share, or 28.6x forward P/E. To fully understand why you should be careful with TXN, check out our full research report (it’s free).

Littelfuse (LFUS)

Rolling One-Year Beta: 1.69

The developer of the first blade-type automotive fuse, Littelfuse (NASDAQ:LFUS) provides electrical protection and control components for the automotive, industrial, electronics, and telecommunications industries.

Why Do We Avoid LFUS?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 6% annually over the last two years

2. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 24.1% annually, worse than its revenue

3. Eroding returns on capital suggest its historical profit centers are aging

At $191.09 per share, Littelfuse trades at 19.6x forward P/E. Dive into our free research report to see why there are better opportunities than LFUS.

Benchmark (BHE)

Rolling One-Year Beta: 1.52

Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE:BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.

Why Is BHE Not Exciting?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 5.8% annually over the last two years

2. Low free cash flow margin of 1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

3. Underwhelming 7.3% return on capital reflects management’s difficulties in finding profitable growth opportunities