For those not yet accustomed to these wild price swings, there's always Pepto Bismol. For everyone else, it should come as no surprise that dozens of new highs were made within the past week. 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. Coca-Cola
Still, other companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.
Shop till you drop
Good luck convincing BJ's Wholesale
Even prior to the purchase, BJ's stock wasn't all that cheap. Its latest earnings report detailed a 3.8% jump in same-store sales -- excluding fuel. But more importantly, visits to its stores were flat. The growth really derived from price increases passed along to consumers and from cost cutting. Without a buyout, with BJ's valued at 16 times forward earnings, I'd much rather own Wal-Mart, which, at 11 times forward earnings and sporting a yield of 2.8%, makes a far more attractive play.
The volatility over the past few weeks reminds me of an E*TRADE commercial where a day trader jumps out his window after witnessing his losses piling up -- luckily for him, the window was on the first floor. All kidding aside, day trading and volatility are no laughing matter, but buying into volatility-based ETFs certainly should be.
Due to the daily rebalancing and decay factor that highly levered ETFs suffer, I cringe in horror when I see traders suckered into such terrible purchases as the VelocityShares Daily 2X VIX
Since this week is all about trading up to better ideas, I have to wonder what shareholders of Allied Nevada Gold
Instead, if gold is your go-to investment, I suggest looking further into Newmont Mining
As stated earlier, this week it's all about trading up and out of companies that have lost their potential to add to our bottom line. Whether it's because of a buyout, time decay, or sheer valuation, sometimes it's best to jump ship to a competitor if that's where the real value lies.
What's your take on these companies and ETFs? Are they sells or belles? Share your thoughts in the comments section below and consider adding BJ's Wholesale, VelocityShares Daily 2X VIX, VelocityShares Long VIX Short Term, and Allied Nevada Gold to your watchlist.