AstraZeneca plc (ADR) (AZN), Electronic Arts Inc. (EA): Stocks Are at All-Time Highs…Is it Time to Sell?

Jagged little pill

While a P/E ratio of 10 may not seem high, if you go by price-to-earnings growth the story looks somewhat bleak. AstraZeneca plc (ADR) (NYSE:AZN) will not be growing at 10%, it will actually see declining growth, so near-term a P/E of 10 might still be too high. When you factor in a tough European climate for pharmaceutical companies, expiring patents, and increased pressure from generics, where can the stock really go from here? It’s been a great run, but honestly the price increase has been more fitting of a small-cap growth stock.

I say consider yourself lucky, cash in your gains, and if you really like the company you can buy it after a pull-back. It’s come too far, too fast, with way too many headwinds going forward. The fundamentals are just not there.

Good companies, bad fundamentals

At the beginning of this post I recommended you not sell companies with good fundamentals. But don’t mistake good companies with good fundamentals. All three of these companies have done a lot of things right; that’s why their stocks are at 52 week highs. But their outlook going forward is much more questionable. At these prices their risks outweigh their reward.

Is it time to sell all your stocks? No. But it is time to lighten up on these individual names. Considering how far they’ve risen, and their lack of growth catalysts, the road ahead appears bumpy.

Adem Tahiri has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Adem is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Stocks Are at All-Time Highs…Is it Time to Sell? originally appeared on Fool.com is written by Adem Tahiri.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.