The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here is one stock with lasting competitive advantages and two best left ignored.
Two Stocks to Sell:
Dover (DOV)
One-Month Return: +1.7%
A company that manufactured critical equipment for the United States military during World War II, Dover (NYSE: DOV) manufactures engineered components and specialized equipment for numerous industries.
Why Are We Cautious About DOV?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 4.7% annually
- Eroding returns on capital suggest its historical profit centers are aging
Dover’s stock price of $204.72 implies a valuation ratio of 19.6x forward P/E. To fully understand why you should be careful with DOV, check out our full research report (it’s free).
Knight-Swift Transportation (KNX)
One-Month Return: +7.3%
Covering 1.6 billion loaded miles in 2023 alone, Knight-Swift Transportation (NYSE: KNX) offers less-than-truckload and full truckload delivery services.
Why Do We Avoid KNX?
- Muted 3.7% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Free cash flow margin shrank by 10.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $57.09 per share, Knight-Swift Transportation trades at 32.9x forward P/E. Read our free research report to see why you should think twice about including KNX in your portfolio.
One Stock to Watch:
Maximus (MMS)
One-Month Return: +11.3%
With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE: MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.
Why Are We Fans of MMS?
- Impressive 9.4% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Revenue base of $5.43 billion gives it economies of scale and some distribution advantages
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 34.8% exceeded its revenue gains over the last two years
Maximus is trading at $96.24 per share, or 11.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
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