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. Keeping that in mind, here are three stocks that are likely overheated and some you should look into instead.
Acushnet (GOLF)
One-Month Return: +2.2%
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 Think Twice About GOLF?
- Sales trends were unexciting over the last two years as its 2.2% annual growth was below the typical consumer discretionary company
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Acushnet’s stock price of $72.74 implies a valuation ratio of 19.5x forward P/E. To fully understand why you should be careful with GOLF, check out our full research report (it’s free).
Teledyne (TDY)
One-Month Return: +0.9%
Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE: TDY) offers digital imaging and instrumentation products for various industries.
Why Are We Wary of TDY?
- 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 4.5% annually
- ROIC of 7.7% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $498.24 per share, Teledyne trades at 22.4x forward P/E. Check out our free in-depth research report to learn more about why TDY doesn’t pass our bar.
Ducommun (DCO)
One-Month Return: +12.2%
California’s oldest company, Ducommun (NYSE: DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.
Why Do We Think DCO Will Underperform?
- Average backlog growth of 4.8% over the past two years was mediocre and suggests fewer customers signed long-term contracts
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.1% for the last five years
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Ducommun is trading at $74.62 per share, or 19.5x forward P/E. Read our free research report to see why you should think twice about including DCO in your portfolio.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
