5 New Highs That Are Going Down
I singled out a few of the stocks hitting new all-time highs that I see moving higher in the coming weeks and months.
Now it's time to look at the stocks that may very well be peaking.
There were plenty of stocks hitting new 52-week highs last week. By the end of the week, 235 New York Stock Exchange and 293 Nasdaq listings were high-fiving fresh highs. Some will continue to move higher still, but a few may be hitting the ceiling right now.
Let's go over five stocks that I don't feel justify their lofty levels.
Last Week's High
|Cinemark (NYS: CNK)||$22.28||$17.10|
|Macy's (NYS: M)||$40.68||$22.66|
|Conn's (NAS: CONN)||$16.00||$4.31|
|Firsthand Technology Value (NAS: SVVC)||$37.00||$14.12|
|Joe's Jeans (NAS: JOEZ)||$1.32||$0.50|
Source: Yahoo! Finance.
Even penthouses have roofs
Let's start at the top with Cinemark Holdings.
The Hunger Games earned nearly $153 million at the box office over the weekend, making this the third-biggest debut in theatrical history. However, a single monster hit isn't going to turn around the fortunes of Cinemark and its multiplex ticket-taking peers. Attendance last year was at a 16-year low, and things weren't shaping up so well for 2012 for exhibitors until this past weekend.
Patrons aren't pleased with the ever-increasing ticket and concession prices. It's also easier to wait as the windows between multiplex and retail releases continue to narrow. Yes, Cinemark has a decent dividend to keep yield chasers happy, but the growth of the industry itself is questionable.
Macy's is one of the many consumer-facing companies barreling toward new highs. Folks are shopping again, and an improving economy means that they will be buying even more.
It's a sound thesis, and Macy's has held up well lately. It just completed three fiscal years of growth. Net sales were up just 5.5% last year, and that includes a healthy 40% pop in online sales. It is there where I see a problem. Apparel-centric department store chains have largely escaped the shopper migration from brick-and-mortar stores to cyberspace the way that media companies and consumer electronics superstores have. A dress or suit purchase lends itself to the fitting room, and online retailers that sell clothing have to deal with an unusually large number of returns.
However, software aimed at matching someone's best fit -- by matching up items against stuff that they already own -- is starting to grow in popularity. Macy's is one of the companies at the forefront of this technology, but what happens when it gets into the hands of nimbler companies that can provide much better prices because they lack the physical store overhead? Macy's may look good now, but the future is another story.
Conn's has seen its stock nearly quadruple off its 52-week low. Wow. Nobody probably saw a consumer electronics retailer surging in this dreary climate, but Conn's has strong presences in appliances and furniture -- and those two areas are holding up well against online retailers given the meaty shipping and installation logistics. Fellow Fool Sean Williams panned Conn's after it hit a new high last month. He may have been early, but he's right about Conn's overstaying its welcome at the top after an earnings miss last time out.
Firsthand Technology Value is a closed-end fund selling at a ridiculous premium to its net asset value. The tech fund's NAV was $23.92 per share at the end of 2011, with 82% of that in cash. Why is this fund -- a laggard in 2011 -- trading at nearly $40 a share right now? Well, it has recently been gobbling up shares of Facebook, now owning 600,000 shares. Keep in mind that Firsthand is buying secondary shares at premium valuations. Facebook would have to soar well above its already heady valuation in its IPO for this move to make any sense.
Finally, we have Joe's Jeans. I was briefly a believer in the premium denim company a couple of years ago. I was wooed by its blog showing celebrities out in the wild sporting Joe's gear. However, I then began to wonder why most of its retail sales were stemming from outlet stores. I also wasn't impressed by its flattish wholesale business, and that continues to be the major chunk of the revenue mix here. Joe's has lost more money than Wall Street was expecting in its two previous quarters. It has yet to report on its holiday quarter, and while that could be a strong turnaround moment for the company, it has burned so many investors with its 52-week-high flirtations in the past that they would be smart to see Joe's prove itself worthy first.
Keep reaching for the stars
All five of these companies have come through with monster runs to reach these lofty heights, but tomorrow may not be as kind. If you want to get an early read on some of tomorrow's major gainers, there's a special report on three hidden winners in a booming industry. The report is free -- like this article -- but it won't be around forever, so check it out now.
At the time this article was published The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.