(FORTUNE Magazine) – NOW IS a terrific time to unload two kinds of stocks: those that are overvalued and those that have been hammered down but aren't likely to recover with the economy. The market is hovering near its all-time peak, and some fast-stepping growth companies are vulnerable. Analysts say they will enjoy high price/earnings multiples only as long as they deliver the goods -- steadily increasing profits. Woe be to those that run with the growth pack and are tripped up by surprise earnings shortfalls. Investors should also be wary of fool's gold, fallen stocks in cyclical and troubled industries like autos and metals. In the current so far, so weak recovery, promises of an upturn for many of those shares may not materialize anytime soon. Several growth companies that came up short, including Alberto-Culver and Borden, have already been, in Wall Street parlance, taken out back and shot. ''The market has been -- and remains -- hypersensitive to bad news,'' says Kurt Feuerman, a food industry analyst with Morgan Stanley. ''It's particularly fearful of bad earnings reports.'' One company whose stock may have sprinted too far ahead is Pall Corp., which makes disposable filters. The stock rose on a tide of investor enthusiasm for health care companies and now sells for $38 a share, or 27 times trailing earnings. Pall may be a short-term beneficiary of mistaken identity, says analyst James Spencer of Wertheim Schroder. Only 41% of revenues really come from the health care sector, the rest from aerospace and other industries. ''The P/E,'' Spencer says, ''is just too high.'' While the computer industry has stumbled, Hewlett-Packard has generally been above the fray. But Barry Willman, an analyst with Sanford C. Bernstein & Co., sees more challenging times ahead. ''Future earnings will be more volatile,'' says Willman, ''and the price/earnings premium Hewlett-Packard's stock enjoys is not sustainable.'' He argues that gross profit margins are eroding as the company shifts from the test and measurement business to other lines, like personal printers and workstations, which have lower margins and face stiffer competition. Bank stocks, though still out of favor, got a lift this summer from falling interest rates and three announcements of large mergers. ''Two realizations have driven the recovery in bank stocks,'' says James McDermott of Keefe Bruyette & Woods. ''One, the world isn't coming to an end, and two, the anticipation that more banks will merge.'' Though some bank stocks will flourish as the industry consolidates, McDermott cautions that investors should tread carefully and avoid banks that are overleveraged or continue to show large write-offs. McDermott also sees risk in bank stocks bid up in expectation of a big merger that fails to materialize. One example is Barnett Banks, Florida's largest, which sells for $31 a share, 27 times earnings. The stock rose this year on hopes that Barnett might achieve economies by acquiring its troubled neighbor, Southeast Banking Corp. Last month a rival won Southeast. Thus far, however, Barnett's stock price remains high, while questions linger about its real estate portfolio. Now listen to some shortsellers, investors who borrow stocks and sell them, hoping to make money when the price falls. James Chanos, president of Kynikos Associates, sees a Texas-style debacle building in California's commercial real estate market. ''The bad news is just about to hit there, particularly in Southern California,'' he says. ''There will be significant increases in both foreclosures and delinquency rates.'' Michael Murphy, a shortseller who edits the Overpriced Stock Service newsletter, thinks one bank in particular may be skewered by the real estate decline. ''The most likely West Coast victim among banks, and our choice to sell, is Wells Fargo. It's very leveraged, and half its loans are in real estate,'' says Murphy. Wells Fargo's stock sells for about $74 a share, or eight times earnings. Westinghouse Electric is yet another victim of the real estate plague. The company took a $975 million charge against 1990 earnings in its financial services unit to cover restructuring and deteriorating assets. But analyst Nicholas Heymann of County NatWest Securities believes more bad news is coming. He figures that cleaning up the problem will cost Westinghouse another $1 billion or so and that the company will be forced to cut its $1.40 dividend, perhaps by as much as one half, harming its $22-a-share stock price. ''The market has yet to digest the impact on the dividend,'' says Heymann.

In the communications industry, Eric Buck of Donaldson Lufkin Jenrette has concerns about Northern Telecom. The stock sells for about $40, a P/E of 21. The company intends to expand its international businesses, and the shares have risen on those expectations. Buck isn't sure the company can deliver. ''Internationally, they're babes in the woods,'' he says. Competitors like Ericsson and Siemens are far more experienced in global markets. Meanwhile, competition in the U.S. is squeezing profit margins on fiber optics and other transmission products. Just the kind of news that causes air pockets for onetime highfliers.