A number of investors watch the list of 52-week highs each day or eachweek. It is a list that tells a story. Stocks that have risen over along period can be a "tell" about investor confidence. But, a loftyprice may also be a signal that a company’s shares may have outrun themarket and are set for a tumble.
A few companies that hit 52-week highs last week:
Baidu (NASDAQ:BIDU)The shares in the Chinese search engine company may be the single mostimportant proxy traded on US markets about how the super-hot economy inthat country is viewed. The firm is visible because it has the largestshare of the search market in China, well ahead of Google (NASDAQ:GOOG)Baidu shares moved to over $359 last week, putting them up about 200%for the year. On comments that the company might not have strong Q4guidance, the stock slipped to under $300, but recovered to $323. So,the shares still have a huge gain in 2007. If this stock moves downsharply from here, it indicates problems with China stock valuationsand possibly a concern about internet share valuations.
Charles Schwab (NASDAQ:SCHW)At mid-week, the premier discount broker was up 20% for the year toover $23. But, the remarkable thing about these shares is the recoverythat they have staged since the credit market pulled financial sharesdown two months ago. Schwab is up about 18% since then. Have retailinvestors taken the market drop and trouble with mortgages in stride?Schwab’s stock would seem to indicate that. But, if it moves down andstays down for any period, the smaller investor may have left thebuilding.
Amazon (NASDAQ:AMZN) and Ebay (NASDAQ:EBAY).These stocks are the bell weathers for e-commerce. As retail moves outof physical stores and onto the internet, same-store sales are underpressure. But, if some of that slack is picked up online, then theconsumer may still be with us. Any disappointment in earnings in thesetwo may be a red flag showing that consumer spending has moved into thenegative column.
GM (NYSE:GM)Is Detroit back. GM shares seem to say so. For the first time sinceOctober 2004, GM shares moved above $43. The market believes that GM’ssteady sales in the US over the last two months coupled with costreductions coming out of the UAW negotiations mean the the company’sNorth American operations may finally be out of the woods. But, ifsales comparisons with last year turn negative in the fourth quarter,high fuel prices, a surging Toyota (NYSE:TM),and a falling housing market may have begun to drag auto sales sharplydown. GM share would be in for a significant correction.
Douglas A. McIntyre is a partner at 24/Wall St.