When a company hits a 52-week high or a multi-year high, there is a natural tendency to assume that the stock must be overvalued.

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Sometimes this instinct is correct, and there is little chance of further gains. New highs don't always signal overvalue, however. Have you ever heard of Google (Nasdaq:GOOG)? How many people are kicking themselves right now because they sold out when the stock hit one of its countless new highs?

If the underlying business is humming and the outlook remains solid, it's always possible that the shares could continue to make new highs. Of course, therein lies the key - trying to assess whether a company's prospects are bright.

SEE: The 5 Biggest Stock Market Myths

Unfortunately, there is no sure fire way to test if a company has peaked. Analyzing companies can be very subjective - like judging a gymnastics contest. Two people can look at the same situation and come to two very different conclusions. Below is a list of companies that are trading near their 52-week highs and are deserving of additional research.

Company Perf YTD Market Cap
Bed Bath & Beyond (Nasdaq:BBBY) +23.12% 16.7B
Berkshire Hathaway (NYSE:BRK.A) +5.81% 199.6B
Walt Disney (NYSE:DIS) +20.03% 80.4B
Coca-Cola (NYSE:KO) +9.43% 172.9B
Pepsico (NYSE:PEP) +2.26% 106.1B
Data as of 05/15/2012

Bottom Line
There's no guarantee that buying stocks that are at or near highs will yield gains. That said momentum coupled with solid fundamentals could potentially make for a solid investment.

SEE: Guide to Stock-Picking Strategies

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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