An article published on Seeking Alpha on October 2, 2025, made a rather unambiguous declaration. In I Wouldn't Dare Buy These 3 Popular Investments Right Now, analyst Leo Nelissen drew a clear line in the sand, advising investors to steer clear of what many consider portfolio staples. The piece generated a fair amount of discussion—around 90 comments, 91 to be exact—which is a decent, if not overwhelming, sample size for gauging retail sentiment.
Nelissen’s argument is a direct challenge to the prevailing market logic. He targets three specific areas: the Utilities sector, the "Magnificent Seven" and adjacent software stocks, and the speculative world of ultra-high growth. His thesis isn't based on a vague feeling of unease. It's a critique of fundamentals he sees as deteriorating under the surface of popular narratives. For anyone managing their own portfolio, whether through Fidelity Investments or a smaller firm, this is the kind of dissenting analysis that warrants a closer look. The question is not whether Nelissen is "right" or "wrong," but whether his framework for risk is a useful one.
A Triumvirate of Trouble
Nelissen’s "avoid" list is a fascinating cross-section of the modern market. Each category represents a distinct investor psychology, yet he links them with a common thread of misplaced confidence and deteriorating risk-reward profiles.
First, he takes aim at Utilities (e.g., the XLU ETF). This is a direct shot at the heart of conservative, income-focused strategies. For decades, these stocks were the bedrock of low risk investments, offering stable dividends and predictable, albeit slow, growth. Nelissen argues this paradigm is broken. He points to a confluence of political pressure, yields that no longer look attractive in a new interest rate environment, and, most critically, staggering capital expenditure requirements. The need to modernize grids and transition to new energy sources has turned these cash cows into capital sinks. Is a modest dividend enough to compensate for the immense execution risk and balance sheet strain?
Next, he turns his attention to the market’s darlings: the "Mag-7" and the software giants that orbit them. Here, the argument shifts from capital strain to competitive friction. The AI arms race, he suggests, is becoming a zero-sum game. The astronomical spending on infrastructure and R&D isn't necessarily creating a wider moat; it's simply the cost of entry to stay in the game. This transforms these growth engines into something resembling capital-intensive industrial players. The market, however, is still pricing them as untouchable, high-margin software businesses. I've looked at hundreds of these filings, and this particular discrepancy between market perception and the underlying capital intensity is becoming one of the most significant risks I see today. When everyone is spending billions just to keep up, where does the alpha actually come from?
Finally, he addresses the speculative froth: ultra-high growth stocks, epitomized by the holdings of funds like ARKK. This is his least controversial point, but a necessary one. These are companies with "stretched valuations" where the narrative has completely decoupled from any plausible cash flow reality. Nelissen’s caution here is a simple, mathematical one: chasing exponential past returns is a statistically poor strategy. It’s a reminder that hope is not a viable investment thesis, a lesson many learned the hard way in the post-2021 correction.
The Common Denominator: Mispriced Capital Risk
Looking at Nelissen’s three targets, it’s easy to see them as distinct issues. A utility struggling with CapEx seems worlds away from a software giant battling for AI dominance. But my analysis suggests they are three symptoms of the same underlying condition: a systemic mispricing of capital risk.
For years, the cost of capital was effectively zero. This encouraged two things: massive borrowing for legacy businesses (like utilities) and massive cash-burn for speculative ventures (like high-growth tech). In parallel, it inflated the valuations of dominant tech players to levels that assumed their moats were permanent and their margins untouchable. Nelissen's analysis, whether intentionally or not, highlights the end of that era.
The utility sector's problem isn't just that it has to spend money; it's that the return on that invested capital is now highly uncertain and politically vulnerable. The Mag-7's problem isn't that they're investing in AI; it's that the competitive landscape may compress the return on that investment to a degree the market hasn't priced in. And the high-growth sector's problem is that it requires a constant firehose of cheap capital that simply doesn't exist anymore.
This is the story behind the numbers. It’s not about avoiding "bad" sectors. It’s about re-evaluating which business models are truly resilient when capital is no longer a free commodity. The 91 comments on his article likely reflect a spectrum of denial and agreement, but the underlying data points toward a fundamental shift. This is the kind of environment where firms like Fisher Investments or a private wealth manager earn their fees—by navigating the transition from a narrative-driven market to one governed by the cold, hard math of capital allocation. What are the best investments for 2025? They're likely the companies that demonstrate disciplined capital management, not the ones with the most exciting story.
The Real Thesis Is on the Balance Sheet
Leo Nelissen’s article is a useful heuristic for spotting over-extended market segments. He correctly identifies the symptoms: high spending, intense competition, and speculative valuations. But the diagnosis goes deeper. The common thread isn't just "risk," it's a specific kind of risk related to how companies are funding their futures. His three "don't buy" categories are all, in their own way, struggling with the new reality of what a dollar of investment can and should return. The analysis provides a clear warning: stop looking at the income statement's growth story and start scrutinizing the balance sheet's capital strategy. That’s where the real story is being written.
