Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here are two stocks with lasting competitive advantages and one best left ignored.
One Stock to Sell:
Covenant Logistics (CVLG)
One-Month Return: +20.5%
Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ: CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.
Why Should You Sell CVLG?
- Muted 2.7% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Free cash flow margin shrank by 7.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Covenant Logistics is trading at $30.48 per share, or 17x forward P/E. Dive into our free research report to see why there are better opportunities than CVLG.
Two Stocks to Watch:
Yum! Brands (YUM)
One-Month Return: +4.2%
Spun off as an independent company from PepsiCo, Yum! Brands (NYSE: YUM) is a multinational corporation that owns KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill.
Why Could YUM Be a Winner?
- Fast expansion of new restaurants indicates an aggressive approach to attacking untapped market opportunities
- Excellent operating margin of 31.6% highlights the efficiency of its business model
- Robust free cash flow margin of 19.5% gives it many options for capital deployment
Yum! Brands’s stock price of $162.99 implies a valuation ratio of 23.9x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
Parker-Hannifin (PH)
One-Month Return: +10.6%
Founded in 1917, Parker Hannifin (NYSE: PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Do We Watch PH?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 18.5%, and its operating leverage amplified its profits over the last five years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 19.7% exceeded its revenue gains over the last five years
- Strong free cash flow margin of 14.8% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy
At $989.65 per share, Parker-Hannifin trades at 30.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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