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It is hard to ignore stocks that scale 52-week highs or hit the lows as such movements are tracked on a daily basis. Now, the question that looms large is the importance of such news for investors.
Betting on a stock near its 52-week high has its own share of risks as there is a possibility of it scaling higher or going downhill without any warning. At best, 52-week investments can be best described as a touch-and-go strategy which can definitely lead to handsome rewards, but only in conjunction with a particular set of parameters.
While market gurus may be divided in their opinion regarding the 52-week high investment technique, many academicians believe that undervalued 52-week high stocks are lucrative bets.
An Insight into 52-Week High Stocks
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.
Many a times such stocks are prevented from scaling higher despite robust potential, due to the psychological bias of investors who fear that the stocks are overvalued and a price crash is impending.
A few of the stocks remain undervalued due to prolonged under reaction on part of investors despite bullish growth drivers. Meanwhile, 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 and the renewed interest might drive stocks beyond the 52-week high bar. Wall Street’s fast paced trading makes it imperative for investors to step in before the market gets a whiff of it.
Also, recent academic research reveals that if a stock’s current price is near its 52-week high, there are high chances it will outperform peers in the subsequent period. According to researchers George and Hwang, holding 52-week high stocks for six months has resulted in an average monthly gain of 0.45% between 1963 and 2001. Encouragingly, this is twice the gain that can be garnered from similar momentum-based strategies.
Setting the Right Filters
Our time-tested screening technique has been deployed to find 52-week high stocks that hold tremendous potential compared to their respective industries. The added parameters are strong earnings growth expectations, sturdy value metrics and positive price momentum.
These stocks are relatively undervalued compared to their peers, in terms of earnings as well as sales, which make us believe that they will continue their rally for quite some time.
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 high mark soon.
% 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
Lower the ratio, 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 their peers.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This metric helps choose stocks that have higher growth rates 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 beat the market.
Current Price >= 5
This parameter will help screen stocks which are trading at $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 20 stocks that made it through the screen:
Berry Plastics Group Inc. (BERY - Free Report) : The company is engaged in the manufacturing and marketing of value-added plastic consumer packaging and engineered materials. Berry Plastics beat estimates in three out of the trailing four quarters, the average positive surprise being 14.0%.
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 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%.
Cooper-Standard Holdings Inc. (CPS - Free Report) : The company is a supplier of systems and components to 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 surpass estimates in all of the trailing four quarters, clocking an average positive surprise of 51.2%.
NetGear, Inc. (NTGR - Free Report) : The company designs technologically advanced, branded networking products that address the specific needs of small business and home users. NetGear has managed to beat estimates all four times in the trailing four quarters resulting in an average positive earnings surprise of 26.8%.
Amkor Technology, Inc. (AMKR - Free Report) : Amkor is the world's largest independent provider of semiconductor packaging and test services. Also, the company is one of the leading developers of advanced semiconductor packaging and test technology. The company beat earnings estimates in each of the last four quarters at an average of 131.2%.
Qorvo, Inc. (QRVO - Free Report) : It is a major provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. The company was formed with the merger of premier semiconductor manufacturing firms RF Micro Devices, Inc. and TriQuint Semiconductor, Inc. in an all-stock transaction. The company managed to beat estimates twice in the trailing four quarters and has an average positive surprise of 12.0%.
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 »
Unique Zacks Analysis of Your Chosen Ticker
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7 High-Flying Stocks with Strong Upside Potential
It is hard to ignore stocks that scale 52-week highs or hit the lows as such movements are tracked on a daily basis. Now, the question that looms large is the importance of such news for investors.
Betting on a stock near its 52-week high has its own share of risks as there is a possibility of it scaling higher or going downhill without any warning. At best, 52-week investments can be best described as a touch-and-go strategy which can definitely lead to handsome rewards, but only in conjunction with a particular set of parameters.
While market gurus may be divided in their opinion regarding the 52-week high investment technique, many academicians believe that undervalued 52-week high stocks are lucrative bets.
An Insight into 52-Week High Stocks
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.
Many a times such stocks are prevented from scaling higher despite robust potential, due to the psychological bias of investors who fear that the stocks are overvalued and a price crash is impending.
A few of the stocks remain undervalued due to prolonged under reaction on part of investors despite bullish growth drivers. Meanwhile, 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 and the renewed interest might drive stocks beyond the 52-week high bar. Wall Street’s fast paced trading makes it imperative for investors to step in before the market gets a whiff of it.
Also, recent academic research reveals that if a stock’s current price is near its 52-week high, there are high chances it will outperform peers in the subsequent period. According to researchers George and Hwang, holding 52-week high stocks for six months has resulted in an average monthly gain of 0.45% between 1963 and 2001. Encouragingly, this is twice the gain that can be garnered from similar momentum-based strategies.
Setting the Right Filters
Our time-tested screening technique has been deployed to find 52-week high stocks that hold tremendous potential compared to their respective industries. The added parameters are strong earnings growth expectations, sturdy value metrics and positive price momentum.
These stocks are relatively undervalued compared to their peers, in terms of earnings as well as sales, which make us believe that they will continue their rally for quite some time.
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 high mark soon.
% 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
Lower the ratio, 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 their peers.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This metric helps choose stocks that have higher growth rates 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 beat the market.
Current Price >= 5
This parameter will help screen stocks which are trading at $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 20 stocks that made it through the screen:
Berry Plastics Group Inc. (BERY - Free Report) : The company is engaged in the manufacturing and marketing of value-added plastic consumer packaging and engineered materials. Berry Plastics beat estimates in three out of the trailing four quarters, the average positive surprise being 14.0%.
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 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%.
Cooper-Standard Holdings Inc. (CPS - Free Report) : The company is a supplier of systems and components to 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 surpass estimates in all of the trailing four quarters, clocking an average positive surprise of 51.2%.
NetGear, Inc. (NTGR - Free Report) : The company designs technologically advanced, branded networking products that address the specific needs of small business and home users. NetGear has managed to beat estimates all four times in the trailing four quarters resulting in an average positive earnings surprise of 26.8%.
Amkor Technology, Inc. (AMKR - Free Report) : Amkor is the world's largest independent provider of semiconductor packaging and test services. Also, the company is one of the leading developers of advanced semiconductor packaging and test technology. The company beat earnings estimates in each of the last four quarters at an average of 131.2%.
Qorvo, Inc. (QRVO - Free Report) : It is a major provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. The company was formed with the merger of premier semiconductor manufacturing firms RF Micro Devices, Inc. and TriQuint Semiconductor, Inc. in an all-stock transaction. The company managed to beat estimates twice in the trailing four quarters and has an average positive surprise of 12.0%.
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 »