Seeking Alpha
Profile| Send Message|
( followers)

The market is feeling very toppy to me. Equities are up some 20% since the sell off over the summer and 2012 has seen nothing but upward momentum. I am finding it extremely hard to find undervalued firms anymore that I want to put new money to work. Given this, I am looking to add short positions to balance out my portfolio and make money when the inevitable pullback commences. Here are two selections that have very stretched valuations and just crossed under their 50 day moving averages.

ViaSat (NASDAQ:VSAT)

4 reasons VSAT is overvalued at over $45 a share:

  • The stock just crossed under its 50 day moving average. The last time this happened in late summer, the stock dropped some 30% before it bottomed (See Chart)
  • Consensus earnings estimates for FY2012 and FY2013 have significantly come down over the last three months.
  • The company will produce less EPS than it did in FY2007 and FY2008, and yet sells for 48 times forward earnings.
  • Operating cash flow has come down significantly over the past twelve months, compared to the previous year. In addition, the company is highly dependent on government revenue.

LogMein (NASDAQ:LOGM)

4 reasons LOGM is to be avoided at $40 a share:

  • The stock just crossed under its 50 day moving average. When this happened in June, the stock dropped over 30% before it bottomed (See Chart)
  • The company is expected to have a lower EPS in FY2012 than in FY2010. It has a five year projected PEG of over 3 (3.25)
  • The stock is selling for more than 8 times revenues and insiders have sold some 19% of their overall shares in the last six months.
  • Even the stock has gained some 20% over the past three months; earnings estimates for FY2012 have actually declined over that time period.

The market is feeling very toppy to me. Equities are up some 20% since the sell off over the summer and 2012 has seen nothing but upward momentum. I am finding it extremely hard to find undervalued firms anymore that I want to put new money to work. Given this, I am looking to add short positions to balance out my portfolio and make money when the inevitable pullback commences. Here are two selections that have very stretched valuations and just crossed under their 50 day moving averages.

ViaSat - "ViaSat, Inc. designs, produces, and markets satellite and other wireless communication, and networking systems for government and commercial customers". (Business Description from Yahoo Finance)

4 reasons VSAT is overvalued at over $45 a share:

  • The stock just crossed under its 50 day moving average. The last time this happened in late summer, the stock dropped some 30% before it bottomed (See Chart)


(Click to enlarge)

  • Consensus earnings estimates for FY2012 and FY2013 have significantly come down over the last three months.
  • The company will produce less EPS than it did in FY2007 and FY2008, and yet sells for 48 times forward earnings.
  • Operating cash flow has come down significantly over the past twelve months, compared to the previous year. In addition, the company is highly dependent on government revenue.

LogMein - "LogMeIn, Inc. provides on-demand, remote-connectivity, collaboration, and support solutions to small and medium-sized businesses, information technology service providers, mobile carriers, and consumers in the United States and internationally". (Business Description from Yahoo Finance)

4 reasons LOGM is to be avoided at $40 a share:

  • The stock just crossed under its 50 day moving average. When this happened in June, the stock dropped over 30% before it bottomed (See Chart)


(Click to enlarge)

  • The company is expected to have a lower EPS in FY2012 than in FY2010. It has a five year projected PEG of over 3 (3.25)
  • The stock is selling for more than 8 times revenues and insiders have sold some 19% of their overall shares in the last six months.
  • Even the stock has gained some 20% over the past three months; earnings estimates for FY2012 have actually declined over that time period.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in LOGM, VSAT over the next 72 hours.

Source: 2 Overvalued Communication Providers That Could Be Due For A Fall