I am optimistic for what lies ahead in 2012 for the economy and the stock
market. While we are indeed in challenging times, a host of great companies are
out there doing great things. You just have to know where to find them. Plenty
of low-risk dividend stocks are also out there with stable operations and
reliable paydays that will do right by investors in the year ahead. However, it
would be naïve to think it's all smooth sailing from here. Lots of stocks are
more likely heading for a big fall in 2012, especially as the pressure builds
from the euro zone debacle. And as Netflix (NASDAQ: NFLX ) proved to us earlier
in 2011, even Wall Street darlings can crash and burn in spectacular fashion.
Here are five stocks I think are staring at a breakdown in 2012: Cabot Oil & Gas
. One lesson investors should learn as they read all the year-end and look-ahead
stories is the old adage that "past performance does not guarantee future
returns." Case in point: Last year's darlings included Crocs (NASDAQ: CROX
), Netflix and Green Mountain (NASDAQ: GMCR ). Check the performance of those
stocks this year, and you'll see that their track record has taken a decided
turn for the worse. So while some may be skeptical about a bearish call on Cabot
Oil & Gas (NYSE: COG ) after it doubled in 2011, you should review these flops
as proof that what goes up also comes down. Back to Cabot: COG has a nosebleed
price/earnings ratio of about 57 based on 2011 numbers, and even if you use the
$2 earnings per share for fiscal 2012, you're still at a rather pricey PE
ratio of over 37. Shares have more than doubled since mid-2010, but earnings and
sales have grown at a modest pace. Other oil and gas exploration stocks are also
seeing those huge premiums Range Resources (NYSE: RRC ) has a forward PE of
almost 42, for example – but you have to wonder if the rush to natural gas
stocks is premature. Critics have raised
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