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3 Stocks Near 52-Week Highs Worth Selling

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The broad-based S&P 500 endured its first down week in a month last week, but make no mistake about it: The overwhelming sentiment is notably bullish, as rising consumer confidence figures would indicate. For skeptics like me, that's an opportunity to see whether companies have earned their current valuations.

Keep in mind that some companies deserve their current valuations. For instance, automaker Ford (NYSE: F  ) is driving all over its competitors in China with its fuel-efficient EcoBoost engines while maintaining its pickup truck dominance with the F-Series in the U.S., thanks to General Motors' six-year wait in between Silverado and Sierra redesigns. With a quarterly dividend payout that doubled earlier this year, Ford looks like it'll continue to deliver for shareholders. 

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

A rotten apple
There are few sectors that are tougher to gauge than women's apparel. If you thought teenagers change their minds on styles often, I dare you to spend a week in the shoes of an upper-management marketing team for a women's apparel retailer! It's not just the styles that are important here, but pricing is also crucial to the many working women these days who are looking for a great deal. This is why, to me, the recent run-up in women's apparel retailer New York & Company (NYSE: NWY  ) doesn't make sense.

I'll freely admit that New York & Company's profit surprised many on the Street, including me. But, the bottom line is the company used its accounting wand rather than its merchandise to drive these gains. In fact, same-store sales fell 2% year over year as it relied on a deferred income tax provision to boost its profit by $0.6 million. I believe that independent women who are buying New York & Co.'s merchandise are more skeptical than ever about the future of the economy and have pared back their spending in light of rising payroll taxes and previously delayed tax refunds.

Valuation is also a serious concern here. While we're seeing no revenue growth the share price has exploded higher to the point where the company is valued at 27 times forward earnings. There's simply no outfit that can mask this bad apple from the bunch, and I'd suggest leaving it on the sale rack.

Out of gas?
I can't say I'm a huge fan of many alternative-energy companies after the run some have had. However, I'm a clear-as-day pessimist when it comes to proton exchange membrane fuel cell maker Ballard Power Systems (NASDAQ: BLDP  ) .

I think fuel cells could have a viable future. That future, though, is way down the road, when the infrastructure and lower manufacturing costs are there to support it. Ballard has been soaring on news that it'll be powering about 40 of the 50 zero-emission fuel-cell buses in Europe with its revolutionary PEM fuel cells by 2014. Some would see this as Ballard's chance to shine; I see this as a chance to tuck your tail between your legs and sell!

Ballard has demonstrated that it does one thing very well thus far: lose money. Research and development of PEM fuel cells isn't cheap, and the company has lost money in nine of the past 10 years. Furthermore, it's burned through $468 million in free cash over the past decade -- more than double its current market value. Even if they were to receive heavy subsidies, I don't believe PEM fuel cells would be a profitable venture, at least not yet. It's possibly a name worth keeping on your Watchlist, but as an investment it should run out of gas very shortly.

Paper cut
Get something to prop your eyelids open, because my final sell call this week comes from the always exciting paper sector. Usually some of the most boring business can be the most profitable, but that's not the case for Wausau Paper (NYSE: WPP  ) .

Wausau, which operates out of two segments -- tissue and paper -- is in the process of selling its specialty paper business to Expera Specialty Solutions, netting Wausau $110 million. This appears to be the big reason behind the move higher, because every other metric looks as if it'd give shareholders splinters.

Wausau has now missed Wall Street's EPS estimates in two straight quarters, with Wall Street analysts projecting double-digit revenue declines this year and next year! Before this sale, Wausau also had more than $200 million in net debt, which is a bit concerning, considering how profit projections have been moving downward the previous two quarters. The company is trying to position itself for growth by focusing on the tissue market, but its restructuring is bound to hinder its results well into 2015. Simply put, there's only so much that cost-cutting and asset sales can accomplish. At nearly 22 times forward earnings, this is a stock that could give investors a third-degree paper cut if they aren't careful.

Foolish roundup
This week I let history tell the tale. None of these three companies has shown any meaningful growth over the past couple of years, and all share valuations have gone to the moon without solid reasoning.

I'm so confident in my three calls that I plan to make a CAPScall of underperform on each one. The question is: Would you do the same?

Worried about Ford?
If you're concerned that Ford's turnaround has run its course, relax -- there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place -- click here to get started now.

Read/Post Comments (2) | Recommend This Article (3)

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 06, 2013, at 12:31 PM, pmccall00 wrote:

    re BLDP: You fools sell yours and just watch it go up. It is a no brainer!!

  • Report this Comment On June 07, 2013, at 8:57 PM, jaketen2001 wrote:

    Although you may be right about Ballard's fantastic ability to lose money, and your advice to take advantage of this run up and sell is probably sound, Ballard's recent appreciation has nothing to do with the PR announcing they would be running 80% of the fuel cell bus fleet in Europe in 2014. Something they are already doing today. It has more to do with the 60-100 million dollar development contract they signed with VW earlier this year.

    Much has also been made over the infrastructure challenges facing fuel cell makers. I would just point out that FCEL's products run primarily on natural gas but have the ability to run on other fuels, like bio-diesel, when favorable. Ballard's hot new telecom back up product runs on a methane liquid that is both easy to store and source.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and investment planning. You'll often find him writing about Obamacare, marijuana, drug and device development, Social Security, taxes, retirement issues and general macroeconomic topics of interest.

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Related Tickers

5/24/2016 10:22 AM
BLDP $1.38 Down -0.02 -1.43%
Ballard Power Syst… CAPS Rating: **
NWY $1.66 Down -0.10 -5.68%
New York & Company… CAPS Rating: *
WPP $0.00 Down +0.00 +0.00%
Wausau Paper Corp. CAPS Rating: No stars
F $13.26 Up +0.13 +0.99%
Ford CAPS Rating: ****