3 Stocks Near 52-Week Highs Worth Selling

The market indexes may be in danger of falling for the seventh straight week, yet a quick scan using the Motley Fool CAPS stock screener revealed more than 230 companies still trading within 4% of a new 52-week high. For optimists, 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 have actually earned their current valuations.

Keep in mind that some companies deserve their lofty valuations. Shares of Timberland (NYSE: TBL  ) , a Rising Star buy of fellow Fool Alyce Lomax, stomped short-sellers into a pulp this week following news that V.F. Corp. (NYSE: VFC  ) has offered to purchase the company for about $2 billion. This deal brings the Timberland and North Face brands under the same umbrella, and Wall Street seems to like the move.

Still, some companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.

Trading on hope
Don't try telling shareholders of Pharmacyclics (Nasdaq: PCYC  ) that it needs an actual product to trade at a new 52-week high. The company has been trading higher almost daily following a press release last week regarding positive results of its Btk inhibitor, which is aimed at treating chronic lymphocytic leukemia. But what are shareholders really buying?

PCI-32765, Pharmacyclics' primary drug, just completed its phase 1B/2 study, meaning it's still likely years away from potentially hitting the market. Despite this, Pharmacyclics shareholders have tagged the company with a market valuation in excess of $500 million, even though it's burned through $24 million in operating cash flow in the past year. Even the options market has taken notice of Pharmacyclics' lofty valuation, with a significant increase in near-term put activity. It may be time to throw in the towel on Pharmacyclics until we see some late-stage clinical results.

Caveat emptor
Many so-called market enthusiasts, myself included, felt we had seen the last of Crocs (Nasdaq: CROX  ) in 2009. There didn't seem to be much of a chance of a rubber shoe with holes surviving the label of being a fad in a declining spending environment, but somehow Crocs did it. Not only did Crocs survive; the company has been thriving since its lows of 2009, hitting a new 52-week high this week. But is now the time to again step away from Crocs?

I think so, even in light of stronger-than-expected results over the past year. Mall retailers have performed particularly poorly since the start of the year, and the only expectations they've been beating are in the excuse department. Aeropostale (NYSE: ARO  ) and Gap are just two of many names to report weaker consumer spending. Rather than waiting for those weaker consumer trends to trickle down to Crocs, I'd suggest leaving this potential fad now rather than later.

Game over
Konami
(NYSE: KNM  ) shareholders have something to say about the so-called downfall of the gaming industry: "What downfall?" Shares of the low-volume gaming company are within a stone's throw of a new 52-week high despite the tragic earthquake in Japan three months ago.

That's why I would exercise considerable caution about a gaming company based in Japan. A Reuters report indicates that in March alone, Japan's gaming industry lost $87 million in revenue because of the tragedy. Recent trading action in Mad Catz Interactive (Nasdaq: MCZ  ) and Majestic Entertainment suggests many of these gaming stocks are losing steam. It may be the time to power-off Konami for the time being.

Foolish roundup
This week it's all about looking ahead. If profits are still years away, or if consumer spending in rival companies is faltering, it may be time to consider selling.

What's your opinion: Are these stocks sells or belles? Share your thoughts in the comments section below and consider adding Pharmacyclics, Crocs, and Konami to your watchlist to keep up on the latest news with these stocks and their respective sectors.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong. The Motley Fool owns shares of Timberland and Aeropostale. Motley Fool newsletter services have recommended buying shares of Timberland. 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 (14) | Recommend This Article (12)

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 June 17, 2011, at 1:33 PM, stocks2051 wrote:

    Today motley is negative on MCZ:

    "Recent trading action in Mad Catz Interactive (Nasdaq: MCZ ) and Majestic Entertainment suggests many of these gaming stocks are losing steam. It may be the time to power-off Konami for the time being."

    Two days ago Motley is positive on MCZ:

    "Management also raised some cash in a recent private placement to buy back highly dilutive convertible stock debt, and the company is now debt-free. Something had to be done to stop the galloping dilution those notes carried, so this is a net positive for investors.

    All told, I think it's unfair to use Mad Catz as a proxy for the gaming industry as the company is moving beyond designing controllers for other people's games. That international expansion also throws comparisons off-kilter. You should judge Mad Catz on its own merits, and I like what I see."

    this happened before with a different stock; positive and then negative>>>>>the stock went up...Watch MCZ; it will go up......

  • Report this Comment On June 17, 2011, at 1:39 PM, djohdj wrote:

    I have seen the same thing happen. MCZ will be much higher within the next week.

    position long mcz.

  • Report this Comment On June 17, 2011, at 2:42 PM, hole19 wrote:

    Motley fools against CROX. Now I think the fad is the bashing of MF ;)

  • Report this Comment On June 17, 2011, at 4:20 PM, dalemx wrote:

    Sold PCYC nice 40% gain.

  • Report this Comment On June 18, 2011, at 10:45 AM, titus77 wrote:

    @ stocks2051

    You do realize that there is no "Motley" who writes all the articles, right? As for one contributor writing an opposite opinion to another, it happens quite a bit. That's one of the great things about TMF.

  • Report this Comment On June 18, 2011, at 7:39 PM, HarryCaraysGhost wrote:

    If I may quote porte-

    "he-he"

  • Report this Comment On June 19, 2011, at 1:08 PM, stocks2051 wrote:

    Foolish442:

    Sorry for my confusion; boy I can be so dumb. Wow, I feel foolish. .......I hope you at least recognize a degree of legitimacy for my confusion regarding two contradictory articles for the stock: MCZ from Motley Fool… one positive article on a Monday followed by a negative article two days later on a Friday. I think I understand now. You implicitly wrote to me that contributors submitted the contradictory articles about MCZ. We can assume contributors are not employees. An employee never hands an editor his article saying: Here is my contribution for this week. I guess contradictory articles from contributors are acceptable….Many investors would find it a little suspicious if a paid staff writer recommended a stock and then another paid staff writer slammed the same stock a few days later. That would not be one of the great things about TMF. We can assume the contributing authors, Sean Williams and Anders Bylund, are not employed by Motley Fool…….We can, right???

  • Report this Comment On June 19, 2011, at 11:11 PM, TMFUltraLong wrote:

    stocks2051,

    I wouldn't say I've come across as bearish on Mad Catz so much as I'm simply pointing out that it fell off a cliff this week and because of that Konami is the one that may have further downside risk.

    In fact, if you look back at my personal blogs or even my microcap watchlist, I may be one of the most bullish people here on Mad Catz. It's a company I've touted as a personal favorite for well over two years.

    TMFUltraLong

  • Report this Comment On June 19, 2011, at 11:26 PM, rd80 wrote:

    "I guess contradictory articles from contributors are acceptable…"

    Absolutely acceptable. Motley Fool contributors are encouraged to voice their opinion on stocks, even if that opinion differs from another contributor or one of the Fool's newsletters.

    From the statement at the end of each Fool article.

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

  • Report this Comment On June 20, 2011, at 6:20 PM, tedstips wrote:

    why sell a strong stock like CROx because of a new high? Remember when it was $70 with no controls,etc.. Some MF stocks like netflix, etc are 'MO stocks,and keep on running. Let this one run,forget GAp, and the rest of the troubled retailers.

  • Report this Comment On June 21, 2011, at 12:58 PM, stocks2051 wrote:

    Guys: You are educated people. There is an essential question to my post that you have not acknowledged nor answered. It was a fair question. You do not have to answer it...... I will assume I did not communicate well enough in my post for you to see my point..........

  • Report this Comment On June 25, 2011, at 5:13 PM, rsinj wrote:

    stocks2051, you pose a valid question and ironically, TMF being a for profit entity will use this to their advantage. If you've got contradictory views on an investment, well, guess what - one of them is going to be right and that's the one TMF will point to down the road.

    My personal peeve with TMF articles this year is that the authors no longer do any work. They write the template for one article, come up with a catchy title and then reuse it by simply changing the company name, symbol, a few numbers and maybe a graph. If you go look at a few authors and their article history, you'd see this is now their preferred way of penning articles. And I'm not talking about merely using the same ideas and similar analysis, I'm talking about entire articles that are word for word identical.

    I've always been aware of the conflicting views TMF authors have on individual stocks even at the same time - and what's funnier is how they each come to the divergent conclusions and point to TMF tenets of investing/analysis to justify why they're right...yet one is obviously going to be right/wrong.

  • Report this Comment On July 05, 2011, at 5:52 PM, 1caflash wrote:

    I can suggest a "Penny Stock" that might be worth your consideration and in which I invested June 29th, 2011, but I cannot comment on this article. AAPH (American Petro Hunter) is selling Product from one Project in Oklahoma to Sunoco. I also have shares of SXL (Sunoco Logistics). The larger company has the Sweet Dividend and is acquiring businesses, while the start-up firm is exciting because a lot of Hard Work is gradually enhancing its revenues.

  • Report this Comment On August 11, 2011, at 12:57 AM, punyhuman wrote:

    Turns out KNM didn't lose steam; instead, it's reaching new highs even as the market slumps.

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