NEW YORK (TheStreet) -- These three companies are coasting on reputations that are not justified by their current businesses. Their stock prices are vulnerable. Given how volatile the market is, they're good candidates to dive along with a market drop.COST data by YCharts
Costco posted some decent numbers in its most recent earnings report, as total revenue inched up about 1% year over year. But a deeper look into the financials reveals some troubling indicators.
Same-store sales, including fuel and currency impacts, slipped 1% as Costco -- which gets a big slice of its revenue from gasoline purchases -- was hurt by lower gas prices and the a stronger U.S. dollar. Its latest quarter was the company's second straight quarterly decline in same-store sales.
Host is one of the largest real estate investment trusts on the New York Stocks Exchange; it was formed about 20 years ago from the real estate holdings of Marriott International.
The company's most recent earnings report failed to meet analysts' expectations. Management replied that it was merely a temporary setback caused largely by the strength of the dollar. It has 18 major properties in Europe.
Host is heavily invested in older, full-service hotels that have failed to evolve with the 21st century. Younger travelers often prefer the kind of more affordable, limited-service boutique lodgings that are conspicuously absent from Host's portfolio.
REITs in general may be vulnerable to a correction, as they almost tripled in value between January 2009 and June 2015.
If you're looking to go long in this area, consider Omega Healthcare Investors (OHI - Get Report) , which specializes in skilled nursing facilities. Omega has delivered consistent annual growth in dividend revenue and funds from operations for the last five years.
3. Pearson (PSO)
Founded in 1844, this British firm is losing the diversification that that made it an attractive investment in recent years.
Pearson conducts education-related research and describes itself as a "learning company." But until recently, it also owned The Financial Times and The Economist. These have been among the most prestigious business publications in the world.
But the company has sold its ownership stakesin them, and so has divested itself of the assets that separated it from every other digital learning provider.
Before the sales, Pearson derived about three quarters of its revenues from education, with about 60% of sales in the United States. Now it will have to get all its money from this area, and it is not clear that it has established a strong enough position in this competitive market.
These are just three companies that investors should inspect closely before buying. For a list of more companies displaying major sell signals, check out the free report 29 Most Dangerous Stocks, Sell Now!. Inside, you'll see a full list of stocks failing 3 critical "health tests." This could mean rough roads ahead for shareholders. Click here to claim a free copy.