It’s Time to Take Profits in These Very Overvalued Stocks
Why It Matters
Locking in profits now can protect returns from a likely pullback, as inflated valuations risk eroding gains across tech‑heavy and infrastructure stocks.
Key Takeaways
- •Keysight Technologies trades far above Morningstar's $220 fair value estimate.
- •EXFO's LTL freight margins expanded, but stock priced to perfection.
- •WESCO International benefits from data‑center boom yet exceeds $240 valuation.
- •AI chip, networking, and defense spending drive short‑term growth for Keysight.
- •Morningstar suggests locking in gains on these three overvalued stocks.
Summary
Morningstar’s chief U.S. market strategist, Dave Sekera, flagged three additional stocks—Keysight Technologies, EXFO and WESCO International—as significantly overvalued, urging investors to consider taking profits.
Keysight, rated with a wide economic moat for its communications‑testing suite, trades well above Morningstar’s $220 fair‑value estimate despite short‑term tailwinds from AI‑chip infrastructure and defense spending. EXFO, a less‑than‑truckload carrier, has enjoyed margin expansion and a rally, yet its current price matches a $123 fair‑value target. WESCO’s data‑center solutions division has outpaced GDP growth, but the stock’s market price exceeds the $240 valuation Morningstar assigns.
Sekera notes that each company’s recent performance—robust growth for Keysight, margin gains for EXFO, and construction‑driven sales for WESCO—has been priced into the equity, leaving little upside. He emphasizes that the fair‑value gaps signal “priced to perfection” conditions.
For investors, the analysis suggests trimming positions to lock in gains before potential corrections, reinforcing a broader market caution as high‑growth narratives inflate valuations beyond fundamentals.
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