Logic says that most share prices pass a previous high-water mark sooner or later.
Common sense says that shares setting new 52-week highs are more favoured by the market than they used to be.
Shrewd investors will tell you that 'price is what you pay, value is what you get'.
When it comes to the companies below that distinction becomes vital to ensuring the health of your investment – because only one of these businesses is likely to deliver value at its current price.
Harvey Norman Holdings Limited (ASX: HVN) – last traded at $3.76, up 25.6% in the past year.
Better-than-expected results from Harvey Norman sent shares up nearly 20% in the past week to their current price, with the company announcing that the company's medium-term performance would be underpinned by a robust domestic housing market.
However the housing market is of course affected by current low interest rates, and while these are expected to stick around for quite some time, it's disappointing that Harvey Norman has not been created more growth driven by company performance rather than external market conditions.
Without internal factors improving performance, Harvey Norman remains vulnerable both to market downturns and increased competition both from domestic competitors and online retailers with lower fixed costs.
Analyst Morningstar predicts that Australia's two largest supermarkets will begin competing in this market by selling furniture and other appliances through their hardware chains. Morningstar's (albeit conservative) 'fair value' rating of $1.70 should be a warning sign to investors.
G8 Education Ltd (ASX: GEM) – last traded at $5.60, up 86.9% in the past year.
G8 continues its stellar run with new funding sources and acquisitions driving revenue growth of 59% (NPAT up 48%) in the first half of FY14.
A second recent note issue of $85m (curiously in Singaporean dollars) provides further funds for the company's ongoing operations and expansions, of which more are expected this year.
G8's target upper price limit of 4 times earnings has provided no shortage of purchase opportunities, and the group's nascent Singapore operations are also worth watching.
I expect G8 to continue rapidly growing in the short to medium term with new acquisitions and would be happy to buy at its current price, although long-term growth prospects are uncertain.
Competition in the future is highly likely from companies like Affinity Education Group Ltd (ASX: AFJ), which is hoping to emulate G8's success. G8's growth is likely to slow as debt increases and each new acquisition becomes a proportionally smaller increase to the company's size.
For the foreseeable future however I expect G8 to keep marching upwards.
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