Wariness watchword for certain high flyers

AMONG all large-cap U.S. stocks, here are the five that are up the most this year through Oct. 30: ■ Zoom Video Communications Inc., ZM, up 577 percent.

■ Peloton Interactive In, PTON, up 288 percent.

■ Sunrun Inc., RUN, up 277 percent.

■ Enphase Energy Inc., ENPH, up 275 percent.

■ Quidel Corp., QDEL, up

258 percent.

I excluded companies that have agreed to be acquired by other companies or that were trading for less than $1 a share when the year began.

The pandemic has made “Zoom” a household word. With millions of people working from home, its group-conferencing software has made meetings possible.

No question that Zoom’s product answered a crying need of the times. But what about next year?

At $460.91 a share, Zoom stock sells for 158 times the company’s estimated earnings — $2.92 a share — for the fiscal year that will end in January 2022. Is this madness? In my opinion, yes. Can Zoom hold off Facebook, Microsoft and other competitors who may try to muscle into its video-conferencing niche? Maybe, but I wouldn’t bet on it.

Peloton Interactive

Peloton’s exercise bicycles may be stationary, but its stock has vaulted this year to about $110 from about $28. If you’re going to be stuck at home, and if you can afford it, you may as well have a deluxe, feature-laden exercise bike.

I might buy the bike. I would not buy the stock.

I prefer companies with a fairly consistent history of profitability. Peloton has yet to show a full year of profits, and its stock sells for 262 times analysts’ average estimate of profits in fiscal 2022.

Sunrun

Sunrun Inc., based in San Francisco, designs, develops, sells and installs solar energy systems for houses. The stock, which went public in 2015, stayed within hailing distance of $10 a share until this spring, when it surged. It’s now at about $52.

This election season, Democrats have stressed their desire to move the country to renewable energy, rather than fossil fuels. And new investors trading at Robinhood and elsewhere have poured into trendy stocks.

Sunrun may be operationally strong, but I consider it financially weak. The company has debt equal to more than three times stockholders’ equity.

The others

I feel similarly about the fourth- and fifth-best performers. Enphase Energy, which provides energy-management systems for the solar industry. It sells for 76 times recent earnings, but its five-year revenue growth rate is negative.

Quidel Corp. makes medical diagnostic tests. That’s a good niche, I believe, but after a climb this from about $75 a share to $268, I think the stock is ahead of itself.

Grain of salt

Now that I’ve told you exactly what I think, I should tell you why perhaps you shouldn’t listen to me.

I often scorn the high flyers. I’d rather catch a falling knife than jump onto a rising rocket. And I’m often wrong.

In seven columns on this subject, 2012 and 2014 through 2019, I’ve turned up my nose at 24 of the 34 big winners I discussed. Yet those 24 stocks continued to advance over the next 12 months, by an average of 41 percent.