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Stock Strategist

Don't Get Burned by These Firecracker Stocks

These stocks may have done well so far this year, but they could be too hot to handle.

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Fireworks are a beautiful sight from afar. But if you get too close, you're going to end up burned. This can be the case with some stocks, too. Their short-term performance might be a sight to behold, but becoming a long-term investor in these companies after a runup is only going to leave a hole in your portfolio.

Even after the breather the market took in the second quarter of 2010, stocks have come a long way from their 2009 lows, and many have bucked the trend and kept rising as the broader market fell. Some of these rises were justified by the improving conditions of the business. Rising corporate profitability, better access to credit, and a rosier business outlook mean that some stocks are actually worth more now than they were at the start of the year.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.