3 Stocks Near 52-Week Highs Worth Selling

Two full months are now in the books, and the Dow Jones Industrial Average still hasn't logged a triple-digit down day. For optimists, these rallies may seem like a dream come true. For skeptics like me, they're opportunities to see whether these companies have actually earned their current valuations.

Keep in mind that some companies do deserve their current valuations. Online auction site eBay (Nasdaq: EBAY  ) is being bid to new highs on the optimistic view that a revolution toward mobile computing is going to revolutionize its business and open its PayPal payment platform to broader markets.

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

Goodbye, baby; goodbye, bathwater
I've been just waiting patiently for business-to-business software provider BroadVision (Nasdaq: BVSN  ) to get near its 52-week high so I could include it in this weekly series. The company has been a favorite of day traders during the first two months of the year despite the fact that revenue has fallen from $416 million in 2000 to just $17.6 million in 2011. The company is sitting on $54.4 million in cash, but it's rapidly burning through that with each quarterly loss.

The reason for the run-up is speculated to be former stock promoter Jonathan Lebed making it his No. 1 stock pick for 2012. BroadVision's low float provides anyone with a large cash hoard the ability to move the stock. Although, no amount of promotion can hide BroadVision's awful earnings results or its CEO's inability to successfully navigate a turnaround. If you're interested in a closer look at BroadVision, I suggest you read my take on the company from early February.

Get your eyes checked
Although some of you might feel you have 20-20, or even 20-15 vision, if you're optimistic about laser vision correction services company LCA-Vision (Nasdaq: LCAV  ) , I suggest you get a second opinion.

I recall back in the early to mid 2000s when laser correction procedures were all the rage. Competition for these procedures was relatively low, which meant companies could boast high prices and pad their bottom line. This isn't the case anymore. LCA has seen revenue drop at an annualized rate of 23% since 2007. Its 3.2% rise in revenue this year actually broke a three-year streak of contraction.

Also, as is to be expected when revenue contracts so severely, the company hasn't been profitable. Yet investors have moved the stock remarkably higher on speculation that LCA's worst could be behind it. I'm just not sure about that. The company has had to rein in marketing costs and close underperforming locations just to get close to breakeven, and even then still can't turn a profit. Four straight years of losses and six years in a row of declining book value are enough for me to throw in the towel.

Vitameatavegamin
No, this isn't an I Love Lucy commercial, but Vitacost.com (Nasdaq: VITC  ) may have investors drunk on the anticipation that it will be able to cash in on the health-food and vitamin craze sweeping the nation. There's just one problem with that: Consumers are fickle and brand loyalty is almost nonexistent in the weight-loss management sector.

As I mentioned last week, one of the reasons NutriSystem's (Nasdaq: NTRI  ) stock price seems to vacillate so much is because it doesn't have any real brand loyalty behind its product. Most clients tend to use the system for only a few months. There's nothing I see that will differentiate Vitacost.com from any other vitamin and health-food retailer out there. Through the first nine months of 2011, Vitacost's cash flow worsened to an outflow of $11.2 million from an outflow of $4.5 million in the year-ago period. I'm not sure when Vitacost.com will be profitable again, but for the time being I'd consider putting a childproof top on this stock.

Foolish roundup
Sometimes small-cap stocks make the most obvious sell candidates because they often have lower floats and are more prone to emotional trading. These three could be perfect candidates to cast aside based on their worsening fundamentals. I'm so confident in my three calls that I plan to make a CAPScall of underperform on each one. The question now is: Would you do the same?

Share your thoughts in the comments section below and consider using the links below to add these three stocks to your free and personalized watchlist so you can keep track of the latest news with each company. Also, to avoid investing in stocks like these, consider getting a copy of our special report "The Motley Fool's Top Stock for 2012." In it, our chief investment officer details a play he dubbed the "Costco of Latin America." Best of all, this report is free for a limited time, so don't miss out!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He has little tolerance for people who hype stocks for their own benefit. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

Motley Fool newsletter services have recommended buying shares of, and writing puts on, eBay. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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 (9) | Recommend This Article (4)

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 March 01, 2012, at 12:09 PM, sarkasm wrote:

    I can't believe that you think Vitacost belong to weight loss sector. Obviously you did not research enough about what you wrote. It's a solid vitamin company that has better prices than others and is poised to do very well. i am bullish.

  • Report this Comment On March 01, 2012, at 9:57 PM, geophysique wrote:

    You guys are always trashing on Jonathan Lebed like you've got some vendetta or a bone to pick. Many people, overcome by the thirst for easy money, make mistakes in their youth.

    On another track, making correct predictions on any stock, especially a tech stock, is trying at best, and tricky no matter what. Even though a company may have a very marketable service or product, the competition is fierce in the tech sector. I thing Lebed and the NIA crew have got some great insights, and their research into the sector of Social Media Business Platforms is excellent. I always read their suggestions. I like OPTT (Ocean Power Technology). The stock hasn't performed particularly well in the past six months, though it hasn't lost money either, while many of the other companies in the 'green' sector, or alternative energy, have lost money, some have gone bankrupt recently.

    Before you start making ignorant comments about tech companies, based on the fact that Lebed recommends it, try doing research on the company. BVSN has a very marketable product, Clearvale, which has the potential to take the business world by storm. Because they offer Clearvale with a free or paid service, one need not worry about BVSN seeking to sell personal/business information to marketing companies.

    Another notion- they are not burning through their $54,000,000 bank account. They spent a lot of resources developing Clearvale, and are phasing out their somewhat out-dated products. Clearvale will take the tech world by storm during the London Conference in less than two weeks, and if BVSN is trading under $50 next week, many of us will be surprised.

    Last thing- even though BVSN has less than 5 million shares, which makes it susceptible to wild price fluctuation, the notion that NIA, with their 150k shares, are able to control and pump this stock is patently ridiculous. If one of their larger institutional holders were to dump a quarter million shares onto the open market, yes there would be some major corrections, but the market would still value highly the Clearvale platform, and with or without institutional investors, the stock will perform based on company history and solid management.

    Will you have such a scathing review of Jive, which was backed by GS and MS? or are you in their pockets, just like most stock advisors?

    GP

  • Report this Comment On March 01, 2012, at 10:34 PM, geophysique wrote:

    Hey Sean & Co.

    If you are so sure about the downside of BVSN then why don't you short them now? Or have you already, and you are trying to push people to dump the stock so that you can cover your position?

    We may delight in watching you eat your words this week boys!

    http://barchart.com/opinions/stocks/BVSN

  • Report this Comment On March 01, 2012, at 11:13 PM, TMFUltraLong wrote:

    geophysique,

    "Before you start making ignorant comments about tech companies, based on the fact that Lebed recommends it, try doing research on the company. BVSN has a very marketable product, Clearvale, which has the potential to take the business world by storm"

    I did research the company... in fact I've written three articles now on how bad BroadVision's performance has been over the past 11 years. Their CEOs platform is to keep doing what it's doing and that's gotten them from north of 400M in sales to less than $17.6M. Their business shrivels every...single...year. That's not spite talking, that's fact!

    "Another notion- they are not burning through their $54,000,000 bank account. They spent a lot of resources developing Clearvale, and are phasing out their somewhat out-dated products."

    No... that's called burning cash through quarterly loss after quarterly loss. It did not take that much cash to develop Clearvale and I suspect they'll continue to burn their cash balance as their revenue stream dries up even more.

    "Last thing- even though BVSN has less than 5 million shares, which makes it susceptible to wild price fluctuation, the notion that NIA, with their 150k shares, are able to control and pump this stock is patently ridiculous."

    It has nothing to do with the fact that NIA controls more than 3% of the float of this company. It has to do with the fact that a convicted stock-hyper Jonathan Lebed is behind the movement of a company that has absolutely no fundamental reason to be heading higher. Again, not my opinion, this is a fact that Lebed settled with the SEC in regards to hyping stocks back in 1999.

    "Will you have such a scathing review of Jive, which was backed by GS and MS? or are you in their pockets, just like most stock advisors?"

    Jive Software was a recent additiono to my "3 Stocks Near 52-Week Highs Worth Selling"... so no - it gets the exact same treatment as BroadVision.

  • Report this Comment On March 01, 2012, at 11:16 PM, TMFUltraLong wrote:

    geophysique,

    There are no short shares available for BroadVision. I tried to short when the stock was above $40 a few weeks back but was unable to garner shares. Borrowing has been restricted by most brokerages.

    In addition, The Motley Fool's disclosure policy is pretty cut-and-dried when it comes to when we are allowed to trade in securities we write about. I do not currently have any position in BroadVision, but I do have an underperform rating on the stock (of which I am currently up) on my CAPS account. I would be able, assuming I don't write about BroadVision again anytime soon, to enter a short position on BVSN as early as next Tuesday if interested in doing so.

  • Report this Comment On March 02, 2012, at 8:47 AM, montagou wrote:

    I would not sell anything in the ESN area, neither BSVN, nor JiVE, nor SABA, etc.

    Before selling anything, try their products and understand what is going on in this market.

    Past performance is useful sometimes, but before anything else, you need to understand the industry you are talking about...

    We implemented Clearvale in our organization one month ago. I just cannot imagine how it would be to go back to email communications.

    I have not tried all products in the market, but the trend towards this type of systems is clear.

  • Report this Comment On March 02, 2012, at 12:40 PM, geophysique wrote:

    Like Montagou- "We implemented Clearval in our organization one month ago. I cannot imagine how it would be to go back to email communications."

    Exactly. Clearvale has a free edition, from which a company or even individual can see the potential of the platform. I am not sure of the cost of using the Clearvale Enterprise edition, but what I do know is that it takes an Enormous amount of money to develop, implement, and host social media platforms in the Cloud, starting with bandwidth and storage, and continuing with tech support. Of course the company which uses Clearvale is saving themselves the expense of owning a server on premises and paying an IT salary of six figures, so even if Clearvale costs a company five figures a year, they are saving money by not hosting it themselves.

    Back to the cost of development for BVSN, compare to Facebook. Yes it started with some college kids up in Cambridge, but in order for it to become the monolith that it is, it required a $10,000,000 cash infusion from an outside source, you can do the research to find out where that money came from (it happens to be a particular gov't investment fund that starts with a 'D') so data mining is the chief prerogative of FB, whereas Clearvale has no hidden agenda, it is a straight-up business service which is to be paid for by the client. You get what you pay for basically, and there is no third-party client using your private information for gain.

    You will have few followers in your nay-saying of Jonathan Lebed. Yes he is a convicted felon, but the difference between him and 90% of the rest of Wall Street is the conviction. They are all crooks down there, in it for personal gain and to hell with the investors. The thing I have noticed personally about ex-cons is they tend to be more honest than most people, as they have reaped the rewards of sin, and now realize that only through disclosure and honest dealings will they reap the rewards of hard work and painstaking research.

    I heard there are some shorts available for trade today, and there most likely will be some on the market next week. Stick by your guns and buy them Sean, since you are such a stock guru. You know everything about a company's worth and stock trajectory so go with your gut and short them. Show us that you stand by your own advice.

  • Report this Comment On March 02, 2012, at 12:41 PM, geophysique wrote:

    btw how do you answer for this?

    http://barchart.com/opinions/stocks/BVSN

    will you say that they are in on the pump-and-dump also?

  • Report this Comment On March 07, 2012, at 12:50 AM, geophysique wrote:

    Guess what people- the article by the sham non-profit www.aid-society.org was a trigger to hurt BVSN, in order for some people to take profits and scoop up stock at a lower price. It was a Hoax. That website was created today March 6 2012. They have no previous articles, just some blabber. There are major forces at work here people, beware of stock manipulators!

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