Altisource Portfolio Solutions S.A. (ASPS), Cabelas Inc (CAB): Three Stocks Near 52-Week Highs Worth Selling

Hunting for short-sale opportunities
Some of you are going to think I’m a certifiable wacko for suggesting the sale of hunting-and-camping equipment retailer Cabelas Inc (NYSE:CAB) after its phenomenal second-quarter results, but that’s exactly what I’m doing!

In the second quarter, Cabelas Inc (NYSE:CAB) delivered a 10.5% increase in comparable-store sales from the previous year, as EPS rose by 32%. Cabela’s really got a boost from firearm sales with the potential for government regulation still looming over the sector. But, that may soon be coming to an end.

To begin with, the typical Cabelas Inc (NYSE:CAB) customer is going to have his or her pocketbook constrained by higher payroll taxes and the potential for higher taxes from the implementation of the Patient Protection and Affordable Care Act. I expect this to really come to fruition come tax time next year, when sticker shock hits the typical Cabelas Inc (NYSE:CAB) customer, and causes him or her to avoid heading to the store.

Another concern here is that firearm sales cannot continue at their current accelerated pace. With the potential for Congressional legislation still on the table, firearm enthusiasts have been purchasing firearms en masse. However, this is more of a temporary boost in sales based on Congressional rumor rather than an actual pick-up in demand. When heavy emotions surrounding gun control begin to fade, Cabelas Inc (NYSE:CAB) could see firearms sales drop considerably.

Finally, this is a simple case of valuation. Cabelas Inc (NYSE:CAB), like Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), isn’t particularly expensive; yet, at 17 times forward earnings, there seems to be a lot of high expectations baked into the stock’s share price already. Unless the company is able to execute in a near-flawless manner, I don’t see how it can maintain its current valuation.

Foolish roundup
This week’s theme is all about identifying good, but overvalued, companies. For all three companies above, the business models make sense on paper, but external factors, such as rising mortgage rates and the implementation of the PPACA, give credence as to why these stocks may not be as strong as their current share price shows.

The article 3 Stocks Near 52-Week Highs Worth Selling originally appeared on Fool.com and is written by Sean Williams.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Movado Group (NYSE:MOV).

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