Traders get excited when their stocks make big gains. In the end, though, avoiding potholes and fatal errors can be just as valuable as selecting winners.
Chasing hot momentum names can be very seductive. Nothing gets your heart pumping like a stock that surges. Unfortunately, those type of shares often crash and burn later as their true values were often totally disconnected to their market prices.
Wall Street is littered with stocks that show that pattern: GoPro (GPRO) , Fitbit (FIT) , Shake Shack (SHAK) .
3 More Too Hot to Touch
Here are three more stocks that are still too hot to touch. If you own them, seriously consider locking it gains before they become the next casualties of war.
As of April 30, 2018, Ollie's Bargain Outlets (OLLI) fetched over $62 per share. Traders were ponying up almost 63x this year's estimate. Even good news over the next couple of years might see OLLI significantly lower than its current quote.
Any disappointment could torpedo the shares.
Cheap gym memberships without "body shaming" has been a winning strategy for Planet Fitness (PLNT) so far. The company's fast growth and positive chart pattern has the stock too pumped up to offer any value.
As with Ollie's even good news might not be adequate to ensure positive share price action. I could see PLNT down 10% to 15% over the next 24-months if all goes well. If they miss expectations "look out below."
The third stock I chose to highlight was Match Group (MTCH) , the operator of the popular online dating sites shown below.
These are great, growing businesses but MTCH appears incredibly expensive, even compared with its own relatively short trading history.
Facebook's (FB) May 1, 2018, surprise announcement that they will be starting up an internal dating app seriously dented the stock, whose valuation left no room for error. IAC/InterActive (IAC) , Match's former parent company took a major header on that news as well.
Profitable investing is hard work. Don't make it tougher on yourself by owning overpriced, high-risk shares that can sink your portfolio.
When your future welfare is at stake it makes sense to stick with predictable, solid values that can ensure a good life and a secure retirement.
(This is an excerpt of an article that originally appeared on Real Money Pro on May 3. Click here to learn about this dynamic market information service for active traders and to receive daily columns like this from Paul Price, Bret Jensen and others.)
