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
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
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.
Many so-called market enthusiasts, myself included, felt we had seen the last of 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
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
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.