3 Stocks Near 52-Week Highs Worth Selling

Updated

The market melt-up continues with nearly 30% of all CAPS-listed stocks trading within 10% of a 52-week high. 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. Cash-rich chip-equipment maker FSI International (NAS: FSII) rallied this week after being scooped up for $6.20 per share in cash by Tokyo Electron. This looks like a good deal for Tokyo Electron, which paid just 1.7 times projected 2012 revenue, and for FSI shareholders with their stock at a six-year high.

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


Death by mobile
When I make calls in this weekly series they're often for the intermediate or long term. This will be a notably shorter "hit the exits" suggestion on ad-giant Google (NAS: GOOG) . That's right, sell Google! Pick up your jaw and hold your "but's" for a few moments while I explain.

Google definitely is in the sweet spot of PC advertising. It owns the lion's share of the market, has incredible pricing power, and has a cash hoard that'd crush numerous companies. On the other hand, Google has a lot of questions it needs to quickly resolve before I'd consider it a buy in the $600s. Google purchased Motorola Mobility for $12.5 billion, and, other than to acquire its lucrative patent portfolio, the overall transaction still seems like a head-scratcher to me. Also, Google cost-per-click has been on a steady quarter-over-quarter decline for the past nine months now. CPC fell 16% year-over-year in its July-ended quarter, and 1% quarter-over-quarter. This is a direct result of more consumers choosing to get online through smartphones rather than traditional laptops and PCs. Sound familiar? This is the exact dilemma Facebook (NAS: FB) is coping with as it tries to monetize its 102 million mobile-only users through targeted ads.

Until Google clearly defines the purposes behind its Motorola purchase and figures out how to better target and monetize mobile users, I'd be a seller above $600.

A pipeline to avoid
Recent natural gas finds in the U.S. over the past decade have made midstream companies that handle storage and pipeline transportation all the more important. Pipelines and storage companies have relatively predictable costs once their networks are in place and require just minimal maintenance until they need to be replaced. But that doesn't mean they're all created equally.

One midstream company on my naughty list is SemGroup (NAS: SEMG) . In its second-quarter earnings release last week, SemGroup noted earnings grew by 4.9% as its storage capabilities in Cushing, Okla., expanded. However, it also forecast that EBITDA would be at the low end of its previously forecasted range because of lower natural gas prices. If it's not bad enough that SemGroup trades at a pricey 32 times next year's earnings, it also stiffs shareholders where it counts by paying absolutely no dividend. Keep in mind, the average midstream company cranks out a yield around 4.9%! With plenty of better choices, I'd hit the emergency off switch on SemGroup and not look back.

Offside penalty
I don't often make it a habit of including recent IPOs on the new-high list, but I'll make another rare exception for the nightmare that is Manchester United (NYS: MANU) .

For starters, the precedent that has been set for sports teams as tradable entities isn't good. As my Foolish colleague Travis Hoium pointed out just yesterday, multiple teams from MLB and the NHL have gone bankrupt in recent memory, with other sports sharing in the growing pains. In short, very few sports clubs are actually successful money makers.

Manchester United has held up well enough that it grew operating earnings 2.5% so far in 2012 after seeing profits decline 1.6% in 2011 -- but does that really justify a $2.3 billion valuation? Furthermore, the current owners' obscene buyout of the club in 2005 leaves Manchester United with a crippling $2 billion in debt. The offering would have been a nice way to at least make a small dent into that, but the owners instead chose to keep half of the offering profits for themselves while using the remainder to pay down debt. This is exactly why "Bang head here" signs exist!

It's no secret that in its short time as a publicly traded company ManU has garnered the universal hatred of CAPS players -- just three outperform votes compared with 136 underperforms as of this writing -- and you can add me among the majority who feels this is destined for mediocrity at best.

Foolish roundup
Debt, dividends, and divas are the killer D's this week. Until Manchester United tackles its debt problem, SemGroup divvies out a dividend, and Google deals with its mobile-centric CPC declines, these three companies will remain on my naughty list.

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?

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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. He swears his allegiance to the hometown Seattle Sounders. 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 Google and Facebook. Motley Fool newsletter services have recommended buying shares of Google and Facebook. 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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