4 Fad Stocks to Avoid: LNKD, CMG, LULU, SKUL

In both good and bad times, there is never a shortage of fads. Some of the classic ones include Einstein Bagels, Planet Hollywood, Krispy Kreme Doughnuts (NYSE:KKD) and Atari.

True, a fad can make lots of money for investors, but when consumers lose interest, the results can be horrendous.

In fact, we may be seeing this play out with SodaStream (Nasdaq:SODA), which sells a way for consumers to make their own carbonated soft drinks. It’s definitely cool, but might it be easier – and cheaper – to just drink Coca-Cola (NYSE:KO) or Pepsi (NYSE:PEP)?

Since the start of August, the shares have plunged from $77.68 to $38.90 — now that’s a real buzz kill.

What are some other stocks that may be vulnerable to the perils of a fad? Here’s a look at four candidates:

LinkedIn (NYSE:LNKD): New IPO stocks can be a great source of fads, and this may be the case with one of this year’s hottest offerings. The company operates a popular social networking site for professionals, and there’s no doubt has benefited from the halo effect of Facebook.

Yet LinkedIn is trading at nosebleed levels. In fact, two of its lead underwriters, JPMorgan and Morgan Stanley, have issued negative reports.

In addition, a big portion of LinkedIn’s revenue comes from employer recruiting services. Might there be some pressures as the economy weakens?

Chipotle Mexican Grill (NYSE:CMG): There’s little doubt that this company has developed a compelling concept in the fast-casual Mexican food segment.

But there are some danger signs: The valuation is at a pricey 52 times earnings, and there is likely to be deterioration of margins because of rising commodities prices. In fact, the company has been increasing prices, which will probably reduce foot traffic.

It will also get tougher to keep up the top-line momentum. Interestingly enough, Chipotle is already moving beyond its core to find growth, such as by offering breakfast meals as well as launching its new concept, ShopHouse Southeast Asian Kitchen.

Lululemon (NASDAQ:LULU): The company is a fast-growing yoga retailer, but its shares are selling at 57 times earnings. What’s more, competition is becoming an issue, with rivals like Nike (NYSE:NKE), Adidas, Gap (NYSE:GPS) and Limited Brands (NYSE:LTD).

It also seems inevitable that the economy will become a big problem. It is definitely easy to hold off on some purchases of high-priced apparel, right?

Skullcandy (NASDAQ:SKUL): The company develops high-priced headphones for devices like Apple’s (Nasdaq:AAPL) iPhone. The brand has been powerful – but how long can it last? After all, the “millennial” crowd can be fickle. And there may also be saturation — you can find Skullcandy’s products at mainstream retailers like Best Buy (NYSE:BBY) and Target (NYSE:TGT).

The company continues to grow at a rapid pace as shown by its second-quarter revenue spiking 46% to $52.4 million.