Markets

These 3 Stocks Gained Over 25% -- Time to Book Profits?

The fall of the bull market in the U.S. came too fast with the economic activities currently expanding at a moderate pace. The year-to-date decline of nearly 9% in the S&P 500 index has given investors no reason to cheer so far in this year.

While extreme volatility of the market has led to valuation corrections of certain stocks -- providing a golden opportunity to buy them, the irrational movements and exuberance related to the anticipated rate hike have unduly escalated certain asset values.

The elevated prices may seem attractive to investors in the dull local market, which remains highly impacted by the global weakness.

However, the prices of such stocks have deviated from their intrinsic valuation levels, which tend to correct themselves quickly, raising doubts about a company's value and strategic direction in the long run. While making tactical decisions regarding their portfolios, investors need to understand the reasons for such short-term prices changes and stick to their long-term strategic plans.

One way of doing this is to select and add stocks with strong fundamentals and steady dividend income. However, the other alternative is equally effective, which is to book profits on the overpriced stocks with no potential for future growth.

3 Stocks to Book Profits

Selecting stocks to dump could be a tricky proposition. However, with the assistance of our Zacks Stock Screener , one can locate stocks with a red flag.

Here we have zeroed in on three stocks that have gained more than 25% year-to-date despite weak fundamentals. The catch is, however, that these stocks are either a Zacks Rank #4 (Sell) or #5 (Strong Sell) with a negative projected EPS growth rate (F1/F0), thus sounding an early warning of danger ahead.

New Jersey-based The Medicines CompanyMDCO acquires, develops and commercializes biopharmaceutical products in late stages of development. The U.S. Food and Drug Administration intends to approve its first product, Angiomax, for use in the treatment of patients with unstable angina undergoing coronary balloon angioplasty.

Though the company's shares have gained over 38% year-to-date, the disappointing outlook for the second-half of 2015 signals a reversal in the price chart soon enough. Moreover, generic competition for Angiomax, pipeline setbacks as well as slow Cleviprex sales justify its Zacks Rank #5 and projected EPS growth rate of -482% as against the industry average of 4.9%.

Headquartered in Nevada, Ormat Technologies Inc.ORA is a provider of alternative and renewable energy technology. The company engages in the geothermal and recovered energy power business worldwide and operates in two segments, Electricity and Product.

Despite over 25% year-to-date rise in share prices, the material impact on the company's Electricity segment owing to oil and natural gas prices continue to be a major concern. Though the company's latest results showed better cost control, pressurized revenues and compressed margin substantiates its Zacks Rank #4 and projected EPS growth rate of -3.0%, compared with the industry average of 28.5%.

The Ireland-based Prothena Corporation plcPRTA is a biotechnology company focused on the discovery and development of therapeutic monoclonal antibodies for disease-causing proteins. The company is developing the following programs: NEOD001 for Amyloidosis, NEOD002 for Parkinson's disease, MCAM for Inflammatory disease and Metastatic Cancer and Tau for Alzheimer's disease.

This Zacks Rank #4 company witnessed a more than twofold increase in its ADRs on a year-to-date basis despite reporting loss in the first-half of 2015. Being a development-stage biotechnology company, it does not have any approved product in its portfolio yet. Hence, the company's top line mainly comprises collaboration revenues including reimbursements under its license agreement with Roche.

Moreover, higher research and development expenses as a result of elevated spending for pipeline development as well as personnel costs further weighs on the future growth prospects of the company. The company's projected EPS growth rate stands at -786.2% as against the industry average of 4.9%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MEDICINES CO (MDCO): Free Stock Analysis Report

PROTHENA CP PLC (PRTA): Free Stock Analysis Report

ORMAT TECH INC (ORA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

PRTA ORA

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More