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3 Stocks Near 52-Week Highs Worth Selling

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We have one week of 2011 in the books, and once again the market has continued to trend higher virtually without interruption. Just last week I proposed three companies that were at or very near 52-week highs that could be worth letting go. With AutoZone, I couldn't have been more right, but JDS Uniphase continues to taunt my call.

Keep in mind that some companies deserve to be trading at or near new highs. Paychex (Nasdaq: PAYX  ) , for example, continues to outshine its competitors in generating cash flow. But other companies potentially deserve a kick in the pants. Here's a look at three companies that could be worth selling.

Now negotiating sell price
Begin the hate mail now, because it's looking like it's time to let go of (Nasdaq: PCLN  ) . It's nothing against William Shatner; on the contrary, none of the other online booking agencies can match priceline's growth rate or its $1 billion in net cash.

My concern stems from the ongoing booking procedure spat between American Airlines (NYSE: AMR  ) and priceline's competitors, Expedia (Nasdaq: EXPE  ) and Orbitz. For now, priceline has been mum on whether it's going to side with its peers or American, but this uncertainty has all the potential to spell bad news for the entire industry.

Also troublesome are the slowly rising jet fuel prices, which could put a crimp in consumers' travel plans. Given the above, at 13 times book and seven times sales, I'm willing to live my life sans Priceline.

Network down
Cavium Networks
(Nasdaq: CAVM  ) looks precariously expensive if you consider that Cisco Systems (Nasdaq: CSCO  ) is its largest customer right now. Why is that a bad thing? Well, back in November Cisco reported a stinker of a quarter, marked by lower future orders. Current inventories are looking OK, but if this turns into a multi-quarter problem (and I suspect it might), Cavium could be harmed by Cisco's excess inventory.

Statistically speaking, with Cavium trading at nearly 11 times book value and 37 times 2011 earnings projections, I'd have to think there are more attractively valued plays in the networking sector.

Coventry Health Care
(NYSE: CVH  ) nearly made the list based solely on the stock's steady rise since July, despite an expected double-digit revenue decline in fiscal 2010. What ultimately did Coventry in for me, though, is CEO Allen Wise and his complete disregard for shareholders. He's cashed in on stock option grants, dumping more than half a million option-acquired shares since November to reap net proceeds of nearly $6 million and leaving him with just over 110,000 shares.

Insiders can sell for many reasons, ranging from tax purposes to valuation concerns. After Coventry's meteoric rise on declining revenues, my bet is on the latter. As long as the CEO is selling his stake and revenue remains stymied, even Coventry at a forward earnings multiple of 10 isn't enough to lure me in.

Have an opinion on any of the above companies? Let's hear about it in the comment section below!

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We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Sean Williams does not own shares in any companies mentioned in this article. He wonders who would win a fight between William Shatner and Chuck Norris. You can follow him on CAPS under the screen name TMFUltraLong. Motley Fool Options has recommended a write covered straddle position on Paychex, which is a Motley Fool Inside Value pick. Coventry Health Care and are Motley Fool Stock Advisor choices. The Fool has created a bull call spread position on Cisco Systems. Motley Fool Alpha owns shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 07, 2011, at 11:39 AM, Pinhead858 wrote:

    This article seems to suggest that there is no issue between American Airlines and PCLN. Last paragraph.

  • Report this Comment On January 07, 2011, at 12:11 PM, TMFUltraLong wrote:


    At the moment there's no issue, but Priceline is going to have to side with someone and I bet it will be their peers. Either way these question marks create uncertainty and generally speaking uncertainty is something I'd want to avoid.


  • Report this Comment On January 07, 2011, at 12:23 PM, StockMillionare wrote:

    I disagree, I wouldn't short pcln, take a look at my articles, pcln has recently pushed up on strong volume above the critical level of $428.10 there is buying from institutions as it crossed the 10 day moving average.

  • Report this Comment On January 07, 2011, at 12:26 PM, StockMillionare wrote:

    That said, my favorite pick as of right now is zagg. Giant growth potential good earnings, recently blasted through 10 day moving average on extremly high volume. Insider ownership high at 39%, and only 3 analyst covering it meanings it's still under the radar. Institutions only own about 8%, meanings once this thing catches on it will blast off got in at price consolodation of around $7.50. Love the small caps at around 180-200 million. Love the invisible shield patented technology.

  • Report this Comment On January 07, 2011, at 8:11 PM, monshes wrote:

    There are a boatload of technical indicators that disagree, at least in the short term. Stock has stayed flat since Nov, and has broken out to new highs on increased volume. That ain't mom and pop buying. But I'd keep a tight leash on anything right now, this market is long in the tooth ant it is January.

  • Report this Comment On January 07, 2011, at 8:12 PM, monshes wrote:

    Sorry, stock I was referring to was PCLN

  • Report this Comment On January 07, 2011, at 8:28 PM, MichielVerbrugge wrote:

    Our dear American friends should do wel to remember that PCLN makes 90% of their turnover AND profit outside of the venerable US of A.

    So what could a silly and really very uninteresting fight with AA do to the stock?

    Letting this stock go 4 weeks before another Q's numbers seems rather unwise, I think.

    (Dutch) Michiel

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