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4 Stocks Trading Near 52-Week High With More Upside Potential
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Investors generally consider a 52-week high a good criterion for determining an entry or exit point for a given stock. However, stocks touching new 52-week highs are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculation is not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Pilgrim's Pride Corporation (PPC - Free Report) , Sunoco (SUN - Free Report) , Cardinal Health (CAH - Free Report) and Textron (TXT - Free Report) are expected to maintain their momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here, we discuss a strategy to find the right stocks. The technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many times, stocks that hit a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.8 implies the stock is trading within 20% of its 52-week high range.
% Change Price – 4 Weeks > 0
It ensures that the stock price has moved north over the past four weeks.
% Change Price – 12 Weeks > 0
This metric guarantees a continued upward price momentum for the stock over the past three months as well.
Price/Sales <= XIndMed
The lower, the better.
P/E using F(1) Estimate <= XIndMed
This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our four picks of the 13 stocks that made it through the screen:
Pilgrim’s Pride is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. The company offers its services in the United States, Mexico, France, the Netherlands, Puerto Rico and Mexico through a number of distributors, retailers and food service operators.
The company is witnessing growth in the Retail and Foodservice business in Prepared Foods segment along with enhanced operations in Big Bird. Focus on key customers in the foodservice sector has yielded a substantial pipeline of promotional initiatives with leading retailers and food service providers. Pilgrim's Pride is on track with its strategic growth efforts, such as facility expansions and technology integration, which are likely to boost operational efficiency. Apart from this, Pilgrim's Pride has been steadily augmenting marketing support for its brands as they expand and enter new regions.
The Zacks Consensus Estimate for PPC’s 2024 earnings has increased 14.5% to $2.85 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 252.84%.
Sunoco LP is a master limited partnership. It is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. The partnership’s prime business comprises the distribution of motor fuel to roughly 10,000 customers under long-term distribution contracts that include independent dealers, commercial customers, convenience stores and distributors.
The distribution networks of Sunoco reflect a strong business with sustainable and predictable cash flow. Recent acquisitions have expanded the partnership’s business. Sunoco and NuStar Energy L.P. (NS) jointly announced a definitive merger agreement wherein Sunoco will acquire NuStar in an all-stock transaction valued at $7.3 billion, inclusive of assumed debt. This acquisition is expected to bolster Sunoco's financial base, enhance the partnership's credit standing and facilitate distribution while continuing its effective capital allocation strategy on a broader scale.
The Zacks Consensus Estimate for SUN’s 2024 earnings has increased 27.7% to $4.89 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same twice, the average negative surprise being 22.44%.
Cardinal Health is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The Pharmaceutical segment is the second-largest pharmaceutical distributor in the United States and the largest nuclear pharmacy. The Medical segment manufactures products such as single-use surgical drapes, gowns and apparel; exam and surgical gloves; and fluid suction and collection systems, and offers sterile and non-sterile procedure kits.
Last month, Cardinal Health acquired Specialty Network, a technology-enabled multi-specialty group purchasing and practice enhancement organization, for $1.2 billion in cash. This acquisition is likely to create a platform for the company’s expansion across specialty therapeutic areas and increase clinical and economic value for more than 11,500 specialty providers. The acquisition is indicative of Cardinal Health's strategic focus on investing to boost the company's Specialty business and supply cutting-edge personnel, capabilities, and technology that meet important demands for both customers and the business.
The Zacks Consensus Estimate for CAH’s fiscal 2024 earnings has increased 3.9% to $7.28 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 15.64%.
Textron is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. It also offers solutions and services for aircraft, fastening systems, and industrial products and components. Its products include commercial and military helicopters, light- and mid-size business jets, plastic fuel tanks, automotive trim products, golf carts and utility vehicles, turf-car equipment, industrial pumps and gears.
Textron continues to enjoy strong order flows for its commercial and defense products across all its businesses. The continued ramp-up of the military program and higher pricing are anticipated to bolster the Bell unit’s revenue performance in the near term. Higher volumes from Specialized Vehicles and Kautex businesses are likely to aid Industrial revenues.
The Zacks Consensus Estimate for TXT’s 2024 earnings has increased 2.2% to $6.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 13.53%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Image: Bigstock
4 Stocks Trading Near 52-Week High With More Upside Potential
Investors generally consider a 52-week high a good criterion for determining an entry or exit point for a given stock. However, stocks touching new 52-week highs are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculation is not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Pilgrim's Pride Corporation (PPC - Free Report) , Sunoco (SUN - Free Report) , Cardinal Health (CAH - Free Report) and Textron (TXT - Free Report) are expected to maintain their momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here, we discuss a strategy to find the right stocks. The technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many times, stocks that hit a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.8 implies the stock is trading within 20% of its 52-week high range.
% Change Price – 4 Weeks > 0
It ensures that the stock price has moved north over the past four weeks.
% Change Price – 12 Weeks > 0
This metric guarantees a continued upward price momentum for the stock over the past three months as well.
Price/Sales <= XIndMed
The lower, the better.
P/E using F(1) Estimate <= XIndMed
This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our four picks of the 13 stocks that made it through the screen:
Pilgrim’s Pride is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. The company offers its services in the United States, Mexico, France, the Netherlands, Puerto Rico and Mexico through a number of distributors, retailers and food service operators.
The company is witnessing growth in the Retail and Foodservice business in Prepared Foods segment along with enhanced operations in Big Bird. Focus on key customers in the foodservice sector has yielded a substantial pipeline of promotional initiatives with leading retailers and food service providers. Pilgrim's Pride is on track with its strategic growth efforts, such as facility expansions and technology integration, which are likely to boost operational efficiency. Apart from this, Pilgrim's Pride has been steadily augmenting marketing support for its brands as they expand and enter new regions.
The Zacks Consensus Estimate for PPC’s 2024 earnings has increased 14.5% to $2.85 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 252.84%.
Sunoco LP is a master limited partnership. It is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. The partnership’s prime business comprises the distribution of motor fuel to roughly 10,000 customers under long-term distribution contracts that include independent dealers, commercial customers, convenience stores and distributors.
The distribution networks of Sunoco reflect a strong business with sustainable and predictable cash flow. Recent acquisitions have expanded the partnership’s business. Sunoco and NuStar Energy L.P. (NS) jointly announced a definitive merger agreement wherein Sunoco will acquire NuStar in an all-stock transaction valued at $7.3 billion, inclusive of assumed debt. This acquisition is expected to bolster Sunoco's financial base, enhance the partnership's credit standing and facilitate distribution while continuing its effective capital allocation strategy on a broader scale.
The Zacks Consensus Estimate for SUN’s 2024 earnings has increased 27.7% to $4.89 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same twice, the average negative surprise being 22.44%.
Cardinal Health is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The Pharmaceutical segment is the second-largest pharmaceutical distributor in the United States and the largest nuclear pharmacy. The Medical segment manufactures products such as single-use surgical drapes, gowns and apparel; exam and surgical gloves; and fluid suction and collection systems, and offers sterile and non-sterile procedure kits.
Last month, Cardinal Health acquired Specialty Network, a technology-enabled multi-specialty group purchasing and practice enhancement organization, for $1.2 billion in cash. This acquisition is likely to create a platform for the company’s expansion across specialty therapeutic areas and increase clinical and economic value for more than 11,500 specialty providers. The acquisition is indicative of Cardinal Health's strategic focus on investing to boost the company's Specialty business and supply cutting-edge personnel, capabilities, and technology that meet important demands for both customers and the business.
The Zacks Consensus Estimate for CAH’s fiscal 2024 earnings has increased 3.9% to $7.28 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 15.64%.
Textron is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. It also offers solutions and services for aircraft, fastening systems, and industrial products and components. Its products include commercial and military helicopters, light- and mid-size business jets, plastic fuel tanks, automotive trim products, golf carts and utility vehicles, turf-car equipment, industrial pumps and gears.
Textron continues to enjoy strong order flows for its commercial and defense products across all its businesses. The continued ramp-up of the military program and higher pricing are anticipated to bolster the Bell unit’s revenue performance in the near term. Higher volumes from Specialized Vehicles and Kautex businesses are likely to aid Industrial revenues.
The Zacks Consensus Estimate for TXT’s 2024 earnings has increased 2.2% to $6.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 13.53%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance/.