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.
But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. On that note, here is one stock we think lives up to the hype and two best left ignored.
One-Month Return: -0.5%
Originally founded as a necktie company, Ralph Lauren (NYSE:RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Are We Wary of RL?
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Constant currency revenue growth has disappointed over the past two years and shows demand was soft
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Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5.6%
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Projected 4.4 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
Ralph Lauren is trading at $320.11 per share, or 21x forward P/E. To fully understand why you should be careful with RL, check out our full research report (it’s free for active Edge members).
One-Month Return: -0.4%
Born during the 2008 financial crisis when mortgage markets were in turmoil, AGNC Investment (NASDAQ:AGNC) is a real estate investment trust that primarily invests in mortgage-backed securities guaranteed by U.S. government agencies or enterprises.
Why Do We Pass on AGNC?
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Customers borrowered less money this cycle as its net interest income declined by 2.8% annually over the last five years
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Earnings per share have contracted by 9.5% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
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Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 12.2% annually over the last five years
At $10.02 per share, AGNC Investment trades at 1.1x forward P/B. Read our free research report to see why you should think twice about including AGNC in your portfolio, it’s free for active Edge members.
One-Month Return: +2%
Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE:ITT) provides motion and fluid handling equipment for various industries
Why Are We Fans of ITT?
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Highly efficient business model is illustrated by its impressive 17.5% operating margin
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Free cash flow margin increased by 17.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
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ROIC punches in at 20.4%, illustrating management’s expertise in identifying profitable investments
