The Curse of High Expectations

In Monday's column, I discussed the reasons I believe the market is near or at overbought levels. Today, I want to talk about some of the most vulnerable stocks in the market should we get a significant decline, or they experience any company-specific disappointing news. This group of vulnerable stocks consists of the high growth/high price-to-earnings stocks that have turned in stellar performances so far in 2013; however, they have gone up so much that they have significantly overshot any kind of reasonable valuation in some cases.

I understand the attraction of riding equities that are showing substantial revenue gains given the overall market is showing no sales growth this quarter. But growth investors are making some of the same mistakes yield investors made earlier in the year. Through April, income investors bid Utilities & Consumer Staple stocks to high up in their historical valuation ranges and then took significant hits as these sectors pulled back starting in May on rising interest rates....431 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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