3 Stocks Near 52-Week Highs Worth Selling

Pessimistic news be damned -- the bulls are running wild down Wall Street. For optimists, these rallies may seem like a dream come true. For skeptics like me, they're opportunities to see whether companies have earned their current valuations.

Keep in mind that some companies deserve their current valuations. Shares of organic and natural food producer Hain Celestial (NAS: HAIN) are hitting new highs on the back of a nationwide shift on battling obesity by eating more nutritious foods. Hain's product selection is pricier than traditional foods, but consumers are willing to trade up for healthier options.

Still, other companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.

Got a light?
After riding the wave higher on U.S. tobacco giant Reynolds American (NYS: RAI) , it's time to change course and reverse my outperform CAPScall to an underperform. Don't get me wrong, Reynolds still offers a premium smokeless tobacco segment with strong growth prospects and has been keeping its shareholders happy with steady dividend increases.

Where my worry stems from is in Reynolds' lack of volume growth and in competitive pricing pressures. Both Altria (NYS: MO) and Reynolds have announced double-digit-percentage jobs cuts to be phased in over the next three years in order to cut expenses. Aggressive anti-smoking campaigns and the cooperation of the Food and Drug Administration and Center for Disease Control and Prevention are blatantly cutting into high-margin, premium brand-name growth.

In Reynolds' most recent quarter, the company noted very slight growth in its Camel and Pall Mall brands in terms of market share, but pointed to a 120-basis-point decline in total cigarette market share. With the pie of potential smokers shrinking, competition heating up, and regulators cracking down on carcinogenic products, you can expect Reynolds to have a tough time finding avenues for growth in the immediate future.

Leave this Diamond in the rough
After months of blasting companies for blaming the weather for weak results, I'm going to be completely hypocritical and use the weather (and valuation) as a primary reason why I'd leave recreational products provider Black Diamond (NAS: BDE) alone.

The first quarter brought relatively good news for Black Diamond shareholders, as the company reported a 19% increase in sales and a doubling in net income per share to $0.10 from the previous year. Profits grew despite higher-priced winter accessories failing to move as well as the company had anticipated.

What concerns me about Black Diamond is its ability to resist the extremely warm summer, which could adversely impact hiking product sales. The company's purchase of POC Sweden may help alleviate its all-seasons product worries, but unpredictable weather patterns may keep higher-priced, higher-margin items sitting on store shelves -- that's what happened last winter. There's also that little bit about Black Diamond's valuation. At more than 60 times forward earnings, it's a far cry from a good value in my opinion. It's time to burst this stock's streak of zero underperform CAPScalls on Motley Fool CAPS.

Smells like roses... dead ones
I'm taking a notably pessimistic view on 1-800-Flowers.com (NAS: FLWS) . That doesn't mean I think you shouldn't buy flowers for that special person in your life, but in the end, flowers aren't a revolutionary product and shouldn't command huge pricing power beyond the costs of inflation.

1-800-Flowers has worked hard to try to diversify its product line by moving into gift baskets and utilizing the power of social and mobile media to drive sales, and to some extent, it's worked. Net sales rose by double-digits across all segments in its latest quarter, although that was largely assisted by the Easter holiday moving forward by one full quarter. But my primary thesis here is simple: It's just flowers!

With few paths to innovation and a product that has only a short-lasting time frame, 1-800-Flowers is going to need to keep trimming its expenses, reducing its debt, and perhaps repurchasing shares in order to drive earnings growth. Even at 17 times forward earnings you're paying too much. Do yourself a favor and send these roses back before you get pricked by a thorn.

Foolish roundup
Flowers, cigarettes, and sporting equipment -- all have the makings of trouble for these three companies. I'm so confident in my three calls that I plan to make a CAPScall of underperform on each one. The question is: Would you do the same?

Share your thoughts in the comments section below, and 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!

The article 3 Stocks Near 52-Week Highs Worth Selling originally appeared on Fool.com.

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.The Motley Fool owns shares of Hain Celestial and Costco. Motley Fool newsletter services have recommended buying shares of Hain Celestial and Costco. 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.

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