Investment rules of thumb are often contradictory — should we take profit from our winners, or keep running them and dump our losers? It’s with that in mind that I’m looking at three soaring stocks that are at or near 52-week highs:
Building boom
At 636p, Barratt Developments (LSE: BDEV) shares are up 61% in 12 months — and up 565% over five years! So does that mean it’s time to sell?
From the depth of the economic slump, Barratt’s profits have grown massively for three years in a row, and though that recovery growth is set to slow, analysts are still predicting solid rises at least as far as June 2016. Results for the year just ended should be with us on 9 September, but we’ll have a year-end update next week — and the firm’s Q3 update told of strong market conditions, with completions for the year set to come in ahead of earlier guidance.
Forecasts for 2016 put the shares on a P/E of under 12, and we should be seeing a dividend yield of around 4.6%. This is a winner that I reckon has further to go.
Home shopping
A company I’m not convinced by is online supermarket Ocado (LSE: OCDO), whose shares have gyrated wildly since flotation. In its latest upwards spike, the price has doubled since mid-October, to 452p.
Ocado did manage to report its first pre-tax profit in 2014, and that’s expected to grow this year and next — at rates of 55% and 39%, which look good on the face of it. But today’s valuation puts the shares on a forward P/E of 220, only dropping to 160 by November 2016! That’s an eye-wateringly high valuation, and earnings would have to multiply more then tenfold beyond 2016 estimates to get it down around the FTSE 100 average of 14.
First-half results looked good, but nowhere near enough to convince me that Ocado should be priced up with the hottest tech growth stocks — I’d be running a mile from this one.
Telly
And finally, the slightly enigmatic ITV (LSE: ITV), whose shares are up 47% in a year to 268p, and up 430% in five years. ITV’s rise has been remarkable, after it revamped its content-provision and advertising businesses through a combination of clear focus and careful acquisitions. That’s brought in steadily-rising earnings and has enabled a progressive dividend policy.
But today, on forward P/E ratings of 15-16 with forecast dividend yields only around 2% to 2.6%, I see the shares as a little expensive compared to some better bargains. ITV is a well-managed company, and that’s worth a premium, but I wouldn’t be buying at today’s prices — though if I already owned some, I don’t think I’d be selling either.