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 the fundamentals to back up its performance and two that may correct.

Two Stocks to Sell:

Walmart (WMT)

One-Month Return: +4.1%

Known for its large-format Supercenters, Walmart (NYSE: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.

Why Does WMT Fall Short?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 5% for the last six years
2. Widely-available products (and therefore stiff competition) result in an inferior gross margin of 24.8% that must be offset through higher volumes
3. Earnings per share fell by 6.7% annually over the last six years while its revenue grew, showing its incremental sales were much less profitable

Walmart is trading at $104.78 per share, or 38x forward P/E. Check out our free in-depth research report to learn more about why WMT doesn’t pass our bar.

LendingClub (LC)

One-Month Return: +8%

Pioneering peer-to-peer lending in the US before evolving into a digital bank, LendingClub (NYSE: LC) operates a marketplace that connects borrowers with lenders, offering personal loans, auto refinancing, and banking services.

Why Is LC Not Exciting?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 8% annually over the last two years
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Below-average return on equity indicates management struggled to find compelling investment opportunities

At $17.22 per share, LendingClub trades at 18.6x forward P/E. If you’re considering LC for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Wintrust Financial (WTFC)

One-Month Return: +4.6%

Founded in 1991 as a community-focused alternative to big banks in the Chicago area, Wintrust Financial (NASDAQGS:WTFC) operates community banks in the Chicago area and provides specialty finance services including insurance premium financing and wealth management.

Why Are We Fans of WTFC?

1. Impressive 15.4% annual net interest income growth over the last five years indicates it’s winning market share this cycle
2. Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 5% annually
3. Annual tangible book value per share growth of 10.3% over the past five years was outstanding, reflecting strong capital accumulation this cycle

Wintrust Financial’s stock price of $134.51 implies a valuation ratio of 1.3x forward P/B. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

High-Quality Stocks for All Market Conditions

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