Markets are getting restless. Valuations are stretched, the global economy is shaky, and after six years of a bull market investors are taking every excuse to sell. Now, more than ever, it’s important to own quality businesses at fair valuations.

Want proof? Look at what’s happened recently to some of the companies we’ve put in the Danger Zone. These are all companies with low or negative profitability and massive growth expectations embedded in their market valuations. Our past 26 Danger Zone calls are on average underperforming the market by 55%.

Five of these stocks have dropped by over 25% and still earn our Dangerous-or-Worse rating. Investors should avoid these sinking stocks that still have further to fall.

Demandware (DWRE)

Demandware landed in the Danger Zone in June, and Barron’s highlighted that call again on September 26. For a long time, investors kept rewarding the company for its high revenue growth and ignoring the fact that in over a decade of operations it’s yet to turn a profit. Moreover, with increasing competition from other young cloud companies as well as giants like Oracle, IBM, and HP means DWRE has little room to raise prices or cut back on its marketing efforts if it wants to retain market share.

DWRE’s lack of profits finally caught up to it when the company reported wider than expected losses on August 4. Combined with disappointing guidance, the news helped send shares down nearly 10%, and they’ve been in free fall ever since, now down 28%

Even with the drop, shares remain expensive. When we first made our call, the market valuation of $72/share implied that the company would achieve pretax margins of 5% and grow revenue by 31% compounded annually for 18 years. Now, with the price down at $52/share, the market implied growth appreciation period (GAP) is still 16 years. That’s a long horizon for profit growth in a rapidly changing industry.

Twitter (TWTR)

We warned investors to stay away from Twitter in June. High revenue growth wasn’t leading to any profits, our adjustments showed that the company’s losses were widening rather than narrowing, and the valuation implied massive revenue growth and margin improvement for the next 17 years.