3 Stocks Near 52-Week Highs Worth Selling

Despite Standard & Poor's surprising the market with a warning regarding U.S. debt earlier in the week, stocks have been for the most part resistant and inching higher since their initial fall. For bulls, these rallies may seem like a dream 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. Food giant Kellogg (NYSE: K  ) is knocking on the door of a new 52-week high as shareholders anticipate another solid quarter and perhaps a quarterly dividend increase. But some companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.

Bueller … Bueller ...
Blackboard
(Nasdaq: BBBB  ) short-sellers got a rude awakening earlier this week after the company said it had received an unsolicited buyout bid. With 44% of the company's shares currently held short, the stock rocketed higher, precipitated somewhat by short covering.

However, longs would probably be smart to rethink their positions here or they may find their hands getting slapped by a cyber-ruler. Blackboard has yet to disclose how much the buyout bid is for, and its online software business, which connects teachers to students, has been performing less than stellarly. Growth recently has been erratic, and I simply can't get too excited about buying into a company trading at nearly 100 times trailing earnings.

Throw in the towel
Homemakers of America and the Motley Fool Stock Advisor team, let me apologize because I don't want hundreds of you on my porch with pitchforks and fire in hand, but bulls' obsession with Bed Bath & Beyond (Nasdaq: BBBY  ) has gone too far.

The retailer of home furnishings and domestic merchandise has been moving higher despite the growing weakness in housing data. What does housing data have to do with Bed Bath & Beyond? It's as simple as this: If home sales remain weak, the likelihood of consumers redecorating or renovating their homes drops. Consumers simply don't have the disposable income that they did in 2007. It'll be interesting to see how well Bed Bath & Beyond fares against last year's figures given that they were aided by the tax credit for first-time homebuyers. I feel it's time to throw in the towel on this one.

Rarified valuation
I really should be including the entire sector here, but rare-earth metals have entered a new stratosphere, specifically Molycorp (NYSE: MCP  ) . Unlike Rare Element Resources (AMEX: REE  ) and Avalon Rare Metals (AMEX: AVL  ) , which are literally years away from producing a dime of revenue, Molycorp is at least digging up dollars.

What's interesting, as fellow Fool Travis Hoium noted, is that Molycorp's recent purchases of 90% of AS Silmet and Santoku America for $89 million and $17.5 million, respectively, have resulted in moves well beyond the market caps for these companies. Shares are absolutely priced for perfection at more than 13 times book value and 167 times trailing annual sales. Even a minor slowdown in production or a dip in rare-earth metals prices could be enough to send this stock lower. That's too much risk and not enough reward, if you ask me.

What's your take on these companies? Voice your thoughts in the comments section below and consider adding these stocks as well as your own personalized list of companies to My Watchlist. Add Blackboard, Bed Bath & Beyond, and Molycorp to My Watchlist.

Also, get a copy of our latest free report, 3 Stocks for $100 Oil.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He blames his shopping allergy as the reason he's not been to Bed Bath & Beyond in five years. You can follow him on CAPS under the screen name TMFUltraLong. Blackboard and Bed Bath & Beyond are Motley Fool Stock Advisor choices. Blackboard is a Motley Fool Hidden Gems selection. Kellogg is a Motley Fool Income Investor selection. 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 that never needs to be sold short.


Read/Post Comments (3) | Recommend This Article (6)

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 April 21, 2011, at 3:38 PM, prescient11 wrote:

    Keep these foolish articles coming, I love it!!!

    You do realize that MCP is not mining anything, correct??

    The complete and utter ignorance of this sector makes me think that we have at least 3 or 4 parabolic moves up from current levels.

  • Report this Comment On April 21, 2011, at 3:51 PM, mhy729 wrote:

    Are there any rare-earths plays that you might be interested in, or do you feel negatively about the entire lot of them?

  • Report this Comment On April 24, 2011, at 8:55 AM, rbgillam wrote:

    I agree completely with the advice to sell Blackboard. The research university I work for recently had an extensive and detailed evaluation of online learning management systems. The review panel decided to replace Blackboard Vista with Instructure's Canvas. They believed that Canvas was more efficient at administering, documenting, tracking, and reporting on classroom and online learning at a competitive price. It wouldn't surprise me if other universities made similar moves away from Blackboard in the near future.

    Interested fools can read about the universities decision at http://www.usu.edu/ust/index.cfm?article=48657

Add your comment.

DocumentId: 1479604, ~/Articles/ArticleHandler.aspx, 4/19/2014 11:17:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement