The stocks in this article are all trading near their 52-week highs. This strength often reflects positive developments such as new product launches, favorable industry trends, or improved financial performance.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here is one stock with lasting competitive advantages and two not so much.
Two Stocks to Sell:
Five Below (FIVE)
One-Month Return: +11.5%
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ: FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Why Does FIVE Fall Short?
- Subscale operations are evident in its revenue base of $4.43 billion, meaning it has fewer distribution channels than its larger rivals
- Gross margin of 35.4% is an output of its commoditized inventory
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Five Below is trading at $213.25 per share, or 31.4x forward P/E. To fully understand why you should be careful with FIVE, check out our full research report (it’s free).
Capital Southwest (CSWC)
One-Month Return: -0.4%
Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ: CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.
Why Are We Hesitant About CSWC?
- Earnings per share fell by 6.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
At $23.00 per share, Capital Southwest trades at 10.1x forward P/E. Read our free research report to see why you should think twice about including CSWC in your portfolio.
One Stock to Watch:
Parker-Hannifin (PH)
One-Month Return: +8.8%
Founded in 1917, Parker Hannifin (NYSE: PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Do We Watch PH?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 18.5%, and its operating leverage amplified its profits over the last five years
- Share repurchases over the last five years enabled its annual earnings per share growth of 19.7% to outpace its revenue gains
- Strong free cash flow margin of 14.8% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
Parker-Hannifin’s stock price of $1,011 implies a valuation ratio of 31x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
