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.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here are three stocks that are likely overheated and some you should look into instead.
Acushnet (GOLF)
One-Month Return: +16.4%
Producer of the acclaimed Titleist Pro V1 golf ball, Acushnet (NYSE: GOLF) is a design and manufacturing company specializing in performance-driven golf products.
Why Do We Steer Clear of GOLF?
- Muted 10.1% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Acushnet’s stock price of $101.55 implies a valuation ratio of 25.3x forward P/E. Check out our free in-depth research report to learn more about why GOLF doesn’t pass our bar.
Toll Brothers (TOL)
One-Month Return: +5.3%
Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE: TOL) is a luxury homebuilder across the United States.
Why Does TOL Worry Us?
- Backlog has dropped by 8.5% on average over the past two years, suggesting it’s losing orders as competition picks up
- Estimated sales decline of 4.8% for the next 12 months implies a challenging demand environment
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3.6 percentage points
At $153.15 per share, Toll Brothers trades at 11.7x forward P/E. If you’re considering TOL for your portfolio, see our FREE research report to learn more.
Merchants Bancorp (MBIN)
One-Month Return: +21.2%
With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.
Why Do We Think Twice About MBIN?
- Net interest margin of 2.9% reflects its high servicing and capital costs
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Insufficient tier one capital ratio of 9.2% leaves little margin for error in meeting regulatory liquidity requirements
Merchants Bancorp is trading at $43.49 per share, or 0.9x forward P/B. Dive into our free research report to see why there are better opportunities than MBIN.
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
