Take Two More Stocks to the Register

On Monday, I recommended that investors in Trinity Industries (TRN) and American Railcar (ARII) trim back their positions after the strong pops in both stocks. The reason was that paper profits are not real profits until you ring the register on some or all of the position. Said a different way, you as an investor should not fall in love with your positions, and you should sell shares just as you buy them -- in stages. It may not be a popular view, but I'll take profits over popularity most days of the week.

Two other stocks that look poised for a pullback are the recent rocket-ship ride that is Under Armour (UA) and Nike (NKE). Now I recognize that this flies in the face of conventional wisdom as we head into the spring sports season. People will be buying baseball gloves and cleats, lacrosse helmets and sticks, softballs and bats, as well as new athletic shoes, mouth-guards and other equipment. And to show that I sympathize with those of you who own Under Armour and Nike shares, I will cop to having a lot of their products -- shoes, shorts, shirts and more -- and I love them. 

But as I said at the start, as an investor, you can't afford to fall in love with your holdings. After climbing 30% year to date and more than 125% over the last year, Under Armour shares are currently trading at more than 60x 2014 consensus earnings of $1.85 per share. The company delivered earnings of $1.50 this year, so earrings are expected to grow only 23% year over year -- that's a price/earnings-to-growth (PEG) ratio of 2.66. Currently, we're in the company's seasonally weakest quarter, and the shares are way into overbought territory. Much the way I suggested at least trimming back positions of Trinity Industries and American Railcar, you should do the same with Under Armour at current levels. If you don't own any Under Armour shares, you'll probably get a better buy-in price, and the shares in my view would be far more compelling below $90. ...205 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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