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Value, special situations, long-term horizon, small-cap
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Back in the late 90s during the dot-com bubble, stocks were trading at outrageous P/Es, often with little or no real business to support them. Since then, that model has been replaced by the IPO of companies with actual revenue and earnings, but whose stocks could only move up during a continuous bear market rally. That's what I believe we've seen the past two years -- a long and powerful bear market rally. Now, these companies that went public in the past decade are going to find their lofty valuations coming down - never to revisit their highs.

Open Table (NASDAQ:OPEN) is a fine reservation service. I've used it many times. The problems with Open Table as a public company are many. Primarily, there is no barrier to entry in this business, it isn't a sticky product, and in the words of Marc Cuban, it doesn't solve a problem. One look at the 10-K's list of risk factors only scares this investor away even more. Now, it's not like the company is going to go bankrupt tomorrow, as it has $69 million in cash on its books and no real debt. However, the company is trading at 55 times current earnings, and it's very difficult to forecast revenues with this kind of business. The stock is almost 50% down from its highs, but I see it as a colossal value trap. No way does this stock revisit its old highs. The path of least resistance is to the downside. I say sell it if you've got it. Aggressive investors may want to short.

First Solar (NASDAQ:FSLR) is not a company I'm impressed with, in a sector that I believe is just one big Ponzi scheme. Solar is expensive, and every business I've ever spoken to has looked into solar and rejected it. They always say the same thing: even with government subsidies, solar does not pay for itself over time. The stock is off its 52 week high of $175, now at $100 and off it's lofty $311 all-time high. Despite large insider holdings, no insider purchases have happened in ages, even at 33% of the all-time high. If the economy turns south, First Solar will really struggle. I realize this is a very contrarian call, but I say sell now.

LinkedIn Corporation (NYSE:LNKD) rounds out the list. In this case, LinkedIn may very well have a long-term business they can defend and profit from. 120 million users is nothing to sneeze at. However, they have a very long way to go in order to really monetize that base to the point where the company isn't sporting an infinite P/E, which it currently does. On next year's earnings of $0.33 (projected), the company presently sells at 250 times next year's estimates. Margins are slim, and there's an awfully long way to go before earnings are meaningful and consistent enough to even warrant a high P/E multiple. For this investor, that says that the stock price will not revisit its $122 all-time high. If your bought in at a higher price, I say cut your losses. Aggressive speculators may wish to short.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 3 Popular, Overpriced One-Trick Ponies Unlikely to Recover From the Recent Plunge