Three consecutive months of jobs growth and fewer worries from Europe have again produced multiyear highs on all of the indexes. 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 deserve their current valuations. Cirrus Logic
Still, other companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.
Health products and home accessory online and catalog retailer Blyth
First, ViSalus sales accounted for almost the entirety of Blyth's fourth-quarter sales boost. The company's PartyLite segment saw sales drop 7%, while its direct selling division witnessed an even worse 11% decline in sales. In short, Blyth appears wholly reliant on its ViSalus line to drive growth. Second, consumers lack loyalty in the weight-loss and supplement sector.
It's been a point I've touched on for multiple weeks now: Weight-loss stocks are a highly cyclical sector, and trends can turn on a dime. After yesterday's pop, I'm calling for a weight loss in terms of the stock's price.
The cloud is out of control
Enthusiasm about cloud computing is getting out of hand. This week's case in point: Equinix
In the fourth quarter, Equinix posted a profit of $0.35 on a 23% rise in sales to $431 million. Not only did EPS come in $0.09 light of what analysts had been expecting, but expense growth outpaced revenue growth (26.6%-24.9%). Although its cash gross margin rose by 300 basis points, the company's frivolous spending and high levels of debt are worrisome. I know everyone wants in on the cloud-computing craze, but at 41 times forward earnings, I'm certain there are better values elsewhere.
That's right, a second cloud play! At least Equinix makes money, which is more than I can say for my next contestant in this series, inContact
Just like Equinix, inContact is sprouting like a weed in summer. Sales in its most recent quarter grew 26% as licensing software added the biggest boost to revenue. But here's where the rubber meets the road: inContact's full-year loss for 2011 grew by more than sevenfold, to $0.23 from $0.03. Higher expenses related to investments in its business continue to be the primary culprit in inContact's losses.
Keep in mind that not every cloud-computing play has to come from a software aspect. Hardware play Intel
This week was all about companies that can't seem to keep spending, and in some cases their debt, under control. Prudent fiscal management is one aspect to hone in on when searching for successful companies; without it, you're asking for trouble. 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's currently on a reverse weight-loss program. 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.
The Motley Fool owns shares of Apple, Cirrus Logic, and Intel. Motley Fool newsletter services have recommended buying shares of Apple and Intel, as well as creating a bull call spread on Apple. 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.