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 is one stock with lasting competitive advantages and two best left ignored.

Two Stocks to Sell:

Reynolds (REYN)

One-Month Return: -7.7%

Best known for its aluminum foil, Reynolds (NASDAQ: REYN) is a household products company whose products focus on food storage, cooking, and waste.

Why Do We Think REYN Will Underperform?

1. Falling unit sales over the past two years imply it may need to invest in product improvements to get back on track
2. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
3. Gross margin of 25.5% is below its competitors, leaving less money to invest in areas like marketing and production facilities

Reynolds’s stock price of $21.51 implies a valuation ratio of 13.7x forward P/E. To fully understand why you should be careful with REYN, check out our full research report (it’s free).

Cincinnati Financial (CINF)

One-Month Return: -0.7%

Founded in 1950 by independent insurance agents seeking stable market options for their clients, Cincinnati Financial (NASDAQ: CINF) provides property casualty insurance, life insurance, and related financial services through independent agencies across 46 states.

Why Are We Wary of CINF?

1. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 14.7% annually
2. Estimated book value per share growth of 4.3% for the next 12 months implies profitability will slow from its two-year trend

Cincinnati Financial is trading at $164.04 per share, or 1.5x forward P/B. Check out our free in-depth research report to learn more about why CINF doesn’t pass our bar.

One Stock to Watch:

Federated Hermes (FHI)

One-Month Return: +4.6%

With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE: FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.

Why Do We Like FHI?

1. Share repurchases have increased shareholder returns as its annual earnings per share growth of 21% exceeded its revenue gains over the last two years
2. ROE punches in at 25.3%, illustrating management’s expertise in identifying profitable investments

At $56.81 per share, Federated Hermes trades at 10.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

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