3 Stocks Near 52-Week Highs Worth Selling

Not even rising oil prices and Egyptian turmoil were enough to keep the Dow and S&P 500 from hitting new multiyear highs this week. For bulls these rallies may seem like dreams come true. For skeptics like me, they're opportunities to see whether companies trading near their 52-week highs really deserve their current valuations.

Keep in mind that some companies deserve their lofty prices. Massey Energy (NYSE: MEE  ) soared to new heights this week after the company agreed to be purchased for $7.1 billion by Alpha Natural Resources (NYSE: ANR  ) , creating a coal juggernaut. But some companies potentially deserve a kick in the pants. Here's a look at three companies that could be worth selling.

Clinical Data (Nasdaq: CLDA  ) makes the list after gaining approval from the Food and Drug Administration for its Viibryd depression drug two weeks ago. Although bulls should revel in the gains from an FDA approval, successfully marketing a drug is a completely different ballgame.

The company faces stiff competition from Eli Lilly's (NYSE: LLY  ) Cymbalta and Forest Labs' (NYSE: FRX  ) Lexapro, as well as numerous generic antidepressants already on the market. There's no guarantee physicians will opt to prescribe Viibryd before any of the other choices. Clinical Data may choose to put the company up for sale, but as Savient Pharmaceuticals showed recently by failing in its search to find a buyer, that's no guarantee of success either.

In a change of pace, rather than targeting one specific company, a commodity that is looking more speculative by the day is cotton, and the iPath Dow Jones UBS Cottton ETN (NYSE: BAL  ) might therefore be worth avoiding. Cotton prices have been rising on speculation that India may fall significantly short of production this year. They've also recently been boosted by the political instability in Egypt.

Cotton is currently trading at a 150-year high, and it appears very unlikely that prices can stay this inflated for a long period of time. Eventually, extra suppliers will step in, and that supply should drive these speculative prices lower. This is a commodity exchange-traded note that's priced for perfection.

Liquefied natural gas producer Cheniere Energy (AMEX: LNG  ) rose to multiyear highs this week on news that Sumitomo had agreed to buy capacity at Cheniere's proposed Louisiana LNG facility. This is good news for bulls, but hardly a slam dunk for the stock. With only one analyst following the company, earnings misses are becoming the norm. Also of concern is the growing short ratio, with 29% of shares currently sold short. A high short ratio isn't an automatic sell, but it is cause for concern. Add in just under $3 billion in debt and a history of losses, and it appears the bears may once again attempt to dig a hole into Cheniere's stock price.

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

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Fool contributor Sean Williams does not own shares in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy which never needs to be sold short.


Read/Post Comments (4) | Recommend This Article (3)

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  • Report this Comment On February 05, 2011, at 6:09 AM, 36510 wrote:

    Well, as far as LNG is concerned you can't project past results into the future. They are in the process of doing a u-turn as far as their business modell is concerned.

    Previously they were processing imported liquified gas, which might have been a good idea before the shale gas revolution came about. But as it has come about, there was not much demand for imported gas.

    Now they are starting to prepare for liquefying shale gas for export. This is sort of the opposite of what they have been doing so far (if they had a chance to do anything at all - they have been using only a fraction of their capacity). Once this new liquefying facility will go into operation, this might well work out much better. Right now, as far as I've read, they are awaiting permission to built it, the granting of which might be the start of a rising stock price.

  • Report this Comment On February 05, 2011, at 12:55 PM, vanguardtrader wrote:

    True that the past is never a true indication of the future. However sometimes history repeats itself. LNG could certainly make big revenues again on exporting if natural gas prices stay low until 2015. If is the question. LNG depends on arbitrage price differences between U.S. and other countries. When these prices are close to parity, LNG pays. Also Cheniere in the mean time has a substantial amount of debt and a real low cash position. So Cheniere will need to raise cash at some point between now and 2015. It could very well be on the shareholders or a dillution of convertibles. So as far as the share price goes. The writer of this article could very well be right.

  • Report this Comment On February 05, 2011, at 1:32 PM, biotech101invest wrote:

    Just ridiculous to recommend selling CLDA, take it from someone that recommended buyin gin 14s right before pdufa date, again at 23 and 25 post approval. RJ Kirk will follow his pattern from King Pharma and New River and sell this company.

    BMY,LLY, PFE , GSK and Forest could all be interested but Forest Labs NEEDS this company NOW.

    Here is a recent post I made on another board

    Multiple party serious buyout talks are going on. REAL negotiations. No secondary while talks ongoing - not a chance.

    Bought some CLDA on the hold of 25 today. Dipped a bit on Adam F secondary tweat yesterday which is BS. I believe co is in serious sale negotiations & there will be no secondary near term Forest Labs has to buy this CLDA - here's why...

    I think if there is no secondary announced tonight (there will not be one) then many shorts and longs buy tomorrow for possible deal over the weekend. I have a lot of CLDA but bought the dip to 25 again.

    CLDA mgt on the call monday said clearly that they have been multiple pharmas interested - talking for months - and now the talks turn to "change of control discussions". Forest Labs is desperate - they lose 56%-60% of their TOTAL revenues in a matter of months when their top selling depression drug goes generic and their savior replacement for Lexapro failed Phase 3 trial Thursday. Forest would have liked to have bought CLDA before this came out - RJ Kirk played poker and won. Now FOREST is DESPERATE and will use some of their $3 billion to buy CLDA or their stock will get crushed. Desperate. (They also lose almost all the rest of the revenue - 30% of total - when their only other decent selling drug goes generic in 2015)

    Problem is Forest will have competition. LLY and BMY almost certainly will come after CLDA and have been talking with them for months - both have been mentioned in analyst reports for a yr. PFE almost certainly is in the mix. Maybe MRK Germany who knows CLDA because they will get 10% royalty.

    Its checkmate for the shorts. Hope they short more. This company will be sold. And then Kirk will move on and will buy a lot more ZIOP, his new venture.

    Gut says Forest Labs will make an offer within a week or two.

    o Depression Experts

    o Largest drug Lexapro (56%-60%) of their TOTAL revenues) goes generic in a matter of months. Alzheimers drug (30% of total revenues) goes generic in 2015

    o Lexipro replacement savior late stage depression compound just failed phase 3 pivotal trial Thursday.

    o Scores of experienced depression salesmen will leave if they don't do something soon. There stock will drop $10-$15 analysts think if they do nothing.

    o Forest has $3 billion in cash. Can have CLDA for $1.2 billion if not other bidders. With BMY, LLY and PFE likely to bid as well - $40 deal likely.

    o Forest HAS to get this deal done. Perfect timing for their sales team to ramp up.

    o Kirk played poker and waited for Forest Ph 3 results - he won. Checkmate. He now has all the leverage.

    After he gets the offer Kirk and many CLDA shareholders who follow kirk and have not sold yet will buy a lot more ZIOP imo. Buy that also

  • Report this Comment On February 05, 2011, at 1:47 PM, theslice wrote:

    Seriously, this author has no idea what he is talking about and neither does Rich Duprey or Brian O'Reilli.

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