As we wrap up 2011, just as we began the year, we are left with no shortage of stocks approaching new 52-week highs. 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. SuccessFactors
Still, other companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.
A visual and monetary eyesore
We've all seen them: antenna towers designed to provide wireless communications companies with the bandwith needed to run their networks. They are both a visual eyesore and, in my opinion, a big portfolio detriment. I've thrown SBA Communications
Unlike SBA, at least Crown Castle is earning money -- but that's where my praise for the stock ends. These antenna tower providers require huge capital infusions to run their businesses, so no matter how far ahead in the future you look, even with increasing cell phone demand, the valuation just doesn't make sense. With Crown Castle boasting a burdensome $6.94 billion in debt and trading at a very aggressive 54 times forward earnings with an expected growth rate of only 11%, there aren't many persuasive reasons I see to own it. This is one stock whose signal could be dimming in 2012.
Following the herd
Under normal circumstances I would not advocate blindly following the herd in or out of a sector -- but I'm pretty much convinced that nearly all teen apparel retailers are a near-term sell. This week I'd like to kick women's retailer bebe stores
Just like Abercrombie & Fitch
It's been a decade since InfoSpace
The company's third-quarter report alluded to an investigation by the Public Company Accounting Oversight Board that may force InfoSpace to restate the way the company accounted for $12.7 million in goodwill. That's the last thing InfoSpace shareholders want to see. Even if the company boasts a healthy cash balance and no debt, the company's contracting margins and pricey forward P/E of 25 is enough to keep me far, far away.
This week, we've isolated three profitable companies that easily could be substituted for cheaper alternatives within their sectors. I've said it before and I'll say it again: Let the values come to you and don't chase a name. I'm so confident in this that I'm going to start these three stocks with underperform ratings in my CAPS portfolio. The question now is, would you do the same?
Share your thoughts in the comments section below and consider adding Crown Castle International, bebe stores, and InfoSpace to your free and personalized watchlist to keep up on the latest news from each company.
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, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. 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.