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It is true that relying on stock screeners can be a potent technique to make most of the market trends and compound returns. However, there is no one single rule or a crystal ball that can help one pick winners in the finance universe.
A particular strategy advises investors to gamble on stocks that have scaled to 52-week highs. While very few may deem it to be rational to invest in a stock which is going up, the trick is to discover soaring stocks that are still undervalued with strong upside potential.
This is where our screener comes into play as it helps you to set the correct parameters with the 52-week high criteria.
Why Bet on Stocks at 52-Week Highs?
Stocks nearing 52-week high often instill the presumptive “adjustment and anchoring bias” principle in the minds of investors. This principle works on the belief that investors use the 52-week high price as a reference point and value stocks against this anchor. They fear that the stocks are overvalued and a price crash is impending. Thus, their psychological bias prevents them from adding positions on such stocks.
In such a situation, these stocks are prevented from scaling higher despite robust potential, due to the psychological reservations of investors.
It takes thorough understanding to tell diamonds from ordinary pebbles, and a few of the stocks remain undervalued due to prolonged under reaction on the part of investors, despite bullish growth drivers. News pertaining to robust sales, surging profit levels, bullish earnings prospects and strategic acquisitions can drive the stock higher.
However, when a string of positive developments start dominating the market, investors find their under-reaction unwarranted as the renewed interest might push stocks beyond the 52-week high bar. Thus, the trick is to get into the betting game before everyone else.
Setting the Right Filters
Make no mistake, 52 week-high stocks have their own share of pitfalls, which might prove perilous. Relying on ad hoc strategies and following price movements blindly carry great risk.
Using our reliable screening technique, we have singled out 52-week highs which still have strong prospects relative to their respective industries. Positive momentum in the stock price blended with strong earnings growth expectations and great value metrics, we believe these stocks will continue their uptrend for quite some time.
We have also made sure these stocks are relatively undervalued compared to their peers, in terms of earnings as well as sales.
Current Price/52 Week High >= .80
This simply 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 that the stock is trading within 20% of its 52-week high range and is likely to touch the 52-week mark soon.
% Change Price – 4 Weeks > 0
It ensures that the price of the stock 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
Lower the ratio, the better for investors as they have to pay lesser price for the same amount of sales.
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 their peers.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This metric helps zero in on stocks that have growth rates higher than the industry median. This is a meaningful indicator as decent earnings growth adds to investor optimism.
Zacks Rank = 1
No screening is complete without our proven Zacks Rank, which has proved its worth since inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) have always managed to brave adversities and outperform the market.
Current Price >= 5
This parameter will help in screening stocks which are trading at a minimum of $5 or higher.
Volume – 20 days (shares) >= 100000
Inclusion of this metric ensures that there is a substantial volume of shares that can be traded easily.
Here are seven of the 21 stocks that made it through the screen:
ANI Pharmaceuticals, Inc. (ANIP - Free Report) : This specialty pharmaceutical company is engaged in developing, manufacturing, marketing branded and generic prescription pharmaceuticals. ANI Pharmaceuticals has managed to beat estimates in two out of four times in the trailing four quarters, resulting in an average positive surprise of 46.8%.
Cooper-Standard Holdings Inc. (CPS - Free Report) : The company operates as a supplier of systems and components for the automotive industry. Its products include sealing and trim, fuel and brake delivery, fluid transfer, thermal and emissions and anti-vibration systems. Cooper-Standard managed to beat estimates in all of the trailing four quarters, clocking an average positive surprise of 51.2%.
Berry Plastics Group Inc. (BERY - Free Report) : The company is engaged in manufacturing and marketing of value-added plastic consumer packaging and engineered materials. Berry Plastics managed to beat estimates in three out of the trailing four quarters, the average positive surprise being 14.0%.
Amkor Technology, Inc. (AMKR - Free Report) : The company is the world's largest independent provider of semiconductor packaging and test services. Also, it is one of the leading developers of advanced semiconductor packaging and test technology. The company managed to beat earnings every time in the last four quarters and has an average positive surprise of 131.2%.
Power Integrations Inc. (POWI - Free Report) : The company is engaged in designing, developing, manufacturing and marketing proprietary, high-voltage, analog integrated circuits that are extensively deployed in alternating current to direct current power conversion. It has an average positive surprise of 20.6%.
Stoneridge Inc. (SRI - Free Report) : The company is a designer and manufacturer of highly engineered electrical & electronic components, modules and systems for the automotive, medium and heavy-duty truck, and agricultural vehicle markets. With an earnings beat in all the four quarters, Stoneridge has an average positive surprise of 21.8%.
Aegean Marine Petroleum Network Inc. : Being a marine fuel logistics company, it physically supplies and markets refined marine fuel and lubricants to ships in ports and at sea. The company managed to beat estimates twice in the trailing four quarters and has an average positive surprise of 12.2%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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 trial to the Research Wizard 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
See More Zacks Research for These Tickers
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7 High-Flying Stocks with More Room to Run
It is true that relying on stock screeners can be a potent technique to make most of the market trends and compound returns. However, there is no one single rule or a crystal ball that can help one pick winners in the finance universe.
A particular strategy advises investors to gamble on stocks that have scaled to 52-week highs. While very few may deem it to be rational to invest in a stock which is going up, the trick is to discover soaring stocks that are still undervalued with strong upside potential.
This is where our screener comes into play as it helps you to set the correct parameters with the 52-week high criteria.
Why Bet on Stocks at 52-Week Highs?
Stocks nearing 52-week high often instill the presumptive “adjustment and anchoring bias” principle in the minds of investors. This principle works on the belief that investors use the 52-week high price as a reference point and value stocks against this anchor. They fear that the stocks are overvalued and a price crash is impending. Thus, their psychological bias prevents them from adding positions on such stocks.
In such a situation, these stocks are prevented from scaling higher despite robust potential, due to the psychological reservations of investors.
It takes thorough understanding to tell diamonds from ordinary pebbles, and a few of the stocks remain undervalued due to prolonged under reaction on the part of investors, despite bullish growth drivers. News pertaining to robust sales, surging profit levels, bullish earnings prospects and strategic acquisitions can drive the stock higher.
However, when a string of positive developments start dominating the market, investors find their under-reaction unwarranted as the renewed interest might push stocks beyond the 52-week high bar. Thus, the trick is to get into the betting game before everyone else.
Setting the Right Filters
Make no mistake, 52 week-high stocks have their own share of pitfalls, which might prove perilous. Relying on ad hoc strategies and following price movements blindly carry great risk.
Using our reliable screening technique, we have singled out 52-week highs which still have strong prospects relative to their respective industries. Positive momentum in the stock price blended with strong earnings growth expectations and great value metrics, we believe these stocks will continue their uptrend for quite some time.
We have also made sure these stocks are relatively undervalued compared to their peers, in terms of earnings as well as sales.
Current Price/52 Week High >= .80
This simply 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 that the stock is trading within 20% of its 52-week high range and is likely to touch the 52-week mark soon.
% Change Price – 4 Weeks > 0
It ensures that the price of the stock 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
Lower the ratio, the better for investors as they have to pay lesser price for the same amount of sales.
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 their peers.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This metric helps zero in on stocks that have growth rates higher than the industry median. This is a meaningful indicator as decent earnings growth adds to investor optimism.
Zacks Rank = 1
No screening is complete without our proven Zacks Rank, which has proved its worth since inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) have always managed to brave adversities and outperform the market.
Current Price >= 5
This parameter will help in screening stocks which are trading at a minimum of $5 or higher.
Volume – 20 days (shares) >= 100000
Inclusion of this metric ensures that there is a substantial volume of shares that can be traded easily.
Here are seven of the 21 stocks that made it through the screen:
ANI Pharmaceuticals, Inc. (ANIP - Free Report) : This specialty pharmaceutical company is engaged in developing, manufacturing, marketing branded and generic prescription pharmaceuticals. ANI Pharmaceuticals has managed to beat estimates in two out of four times in the trailing four quarters, resulting in an average positive surprise of 46.8%.
Cooper-Standard Holdings Inc. (CPS - Free Report) : The company operates as a supplier of systems and components for the automotive industry. Its products include sealing and trim, fuel and brake delivery, fluid transfer, thermal and emissions and anti-vibration systems. Cooper-Standard managed to beat estimates in all of the trailing four quarters, clocking an average positive surprise of 51.2%.
Berry Plastics Group Inc. (BERY - Free Report) : The company is engaged in manufacturing and marketing of value-added plastic consumer packaging and engineered materials. Berry Plastics managed to beat estimates in three out of the trailing four quarters, the average positive surprise being 14.0%.
Amkor Technology, Inc. (AMKR - Free Report) : The company is the world's largest independent provider of semiconductor packaging and test services. Also, it is one of the leading developers of advanced semiconductor packaging and test technology. The company managed to beat earnings every time in the last four quarters and has an average positive surprise of 131.2%.
Power Integrations Inc. (POWI - Free Report) : The company is engaged in designing, developing, manufacturing and marketing proprietary, high-voltage, analog integrated circuits that are extensively deployed in alternating current to direct current power conversion. It has an average positive surprise of 20.6%.
Stoneridge Inc. (SRI - Free Report) : The company is a designer and manufacturer of highly engineered electrical & electronic components, modules and systems for the automotive, medium and heavy-duty truck, and agricultural vehicle markets. With an earnings beat in all the four quarters, Stoneridge has an average positive surprise of 21.8%.
Aegean Marine Petroleum Network Inc. : Being a marine fuel logistics company, it physically supplies and markets refined marine fuel and lubricants to ships in ports and at sea. The company managed to beat estimates twice in the trailing four quarters and has an average positive surprise of 12.2%.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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 trial to the Research Wizard 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »