I’m “hitting the trail” this week, but I’m continuing to monitor our positions. Today, I’m recommending we exit four of our positions.

Let’s start with Simulations Plus (Nasdaq: SLP). It’s our latest massive winner, so it’s time to lock in our profits today.

We’ve had a great run with this position. But with the stock market “melt up” continuing in dramatic fashion in recent days, this position has become extremely popular with traders — and extremely overvalued.

So, let’s take our profits where we can. We’re exiting Simulations Plus with a 78% gain in five months.

Action to take: Sell Simulations Plus (Nasdaq: SLP) at the market.

I think it’s only a matter of time before we see a correction of some kind. The blame may fall on the new spike in COVID-19 cases of recent days. But it doesn’t really matter. When stock prices run to extremes in valuation, it doesn’t take much to take a position down more than a few notches.

SLP’s Ride Higher

(Click here to view larger image.)

In Simulations Plus’ case, the company is expected to earn $0.44 a share this year, and $0.59 a share in 2021. If we do the price-to-earnings (P/E) math with the stock at $61, it means the shares are trading at roughly 100 times next year’s profits.

Granted, the stock could continue to power higher from here. But in this case, I’m suggesting caution over reckless valor.

Let us know how you did on this trade. We’d love to hear from you at totalwealthinsider@banyanhill.com.

Let’s use the same theme for exiting three other positions — two winners and one loss.

• Action to take: Sell ICAD (Nasdaq: ICAD) at the market.

We’re exiting ICAD with a 24% gain after nine months. The gain was even higher earlier this year before the shares succumbed to ongoing COVID-19 worries.

The company is still on a strong track toward profitability. I think ICAD will finish 2020 with a loss of around $0.69 a share, dropping to a $0.20 loss in 2021. Wall Street analysts forecast profits of $0.22 a share for 2022.

But the longer COVID-19 worries dominate, the more people will put off getting cancer diagnostic tests such as ICAD’s — a big worry among medical professionals in recent months. Obviously that hurts ICAD’s outlook as well if the contagion remains in the headlines.

• Action to take: Sell Target (NYSE: TGT) at the market.

We’re exiting Target’s stock with a modest 3% gain after five months. I think the shares should continue to be a core holding in your portfolio if you want to own a solid retailer for the long term — especially one that will continue to be a major player in e-commerce and physical retail for many years to come.

But that’s only if you can stomach the ups and downs of the shares over the same time frame as well.

I expect Target to earn $4.96 next year. At current prices, it means Target’s stock is trading at P/E ratio of nearly 24 — by far its most extreme valuation in nearly 20 years.

• Action to take: Sell Vera Bradley (Nasdaq: VRA) at the market.

We’re exiting VRA with a 62% loss. Vera Bradley’s shares continue to erode due to COVID-19 fears as more retailers, such as Brooks Brothers just this week, declare bankruptcy.

In my opinion, the company has more than enough resources to make it through this crisis. It finished its most recent quarter with $82 million in cash. Even with the disruptions, analysts expect the company to remain profitable this year and next.

Perhaps the best metric is Vera Bradley’s book value/share ratio of 0.5. In other words, investors are valuing the stock at $130 million.

But you’d need $275 million (the actual book value of the company) if you were to show up at headquarters with a fleet of armored trucks and buy the company — inventories, cash in the bank, warehouses it owns and all other assets — for cash in piecemeal, garage sale fashion.

Then again, it’s going to take time for this stock to come around. Time to see our trades work out is one thing that’s in short supply for many of us these days.

Drop my team a line at totalwealthinsider@banyanhill.com if you have any questions about today’s trades.

Best of Good Buys,

Jeff Yastine
Editor, Total Wealth Insider