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Over the past few decades, trading got more challenging with a rising number of investment strategies flooding the markets. The plethora of options can baffle even the most experienced of investors, let alone new entrants in the world of equity investing. However, investors should exercise reasonable caution before zeroing in on any particular strategy as each has its own share of pitfalls.
Thanks to our investment screens, investors can now save on time and make prudent choices to create a solid portfolio. In this screening article, we discuss a particular approach which advises investors to bet on stocks that have scaled 52-week highs.
Borrowing from the basics of Momentum investing, this technique is based on the concept of “buy high and sell higher.” Though skeptics may raise a brow on the mettle of this 52 week-high strategy, we believe that it is time-tested and can rack up sizable gains when clubbed with the right set of parameters.
Understanding the 52-Week High Trend
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.
Setting the Right Filters
Our diligent 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 24 stocks that made it through the screen:
Coherent Inc. (COHR - Free Report) designs, manufactures, and supplies electro-optical systems and medical instruments utilizing laser, precision optic and microelectronic technologies. The company beat estimates in all of the trailing four quarters, at an average of 10.0%.
Headquartered in Santa Clara, CA, Applied Materials (AMAT - Free Report) is engaged in the developing, manufacturing and marketing of semiconductor wafer fabrication equipment and related spare parts for the semiconductor industry. The company has an average positive surprise of 4.5% over the trailing four quarters.
Cambrex Corporation manufactures and markets a broad line of specialty chemicals and commodity chemical intermediates and also manufactures chemicals to customer specifications. With three beats in the trailing four quarters, the company’s average earnings beat stands at 19.8%.
Incorporated in 1959, Houston, TX-based McDermott International Inc. is an engineering and construction company, solely focused on the offshore oil and gas business. The company has a whopping average earnings surprise of 474%, beating estimates in all of the last four quarters.
Headquartered in Pennsylvania, EnerSys (ENS - Free Report) engages in the manufacturing, marketing and distribution of various industrial batteries including motive power, reserve power, aerospace and defense applications. The company has managed to beat earnings thrice in the trailing four quarters and boasts an average positive surprise of 3.0%.
Headquartered in Charlotte, NC, Bank of America Corporation (BAC - Free Report) is a financial holding company. Its banking and non-banking subsidiaries provide a diverse range of financial services and products. The company has an average positive earnings surprise of 6.4%, beating estimates in three of the last four quarters.
Insight Enterprises, Inc. (NSIT - Free Report) is a global direct marketer of computers, hardware and software, primarily catering to small-and-medium-sized businesses. The company has managed to beat earnings twice over the trailing four quarters, at an average of 4.1%.
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 »
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7 Stocks Near 52-Week Highs to Buy Right Now
Over the past few decades, trading got more challenging with a rising number of investment strategies flooding the markets. The plethora of options can baffle even the most experienced of investors, let alone new entrants in the world of equity investing. However, investors should exercise reasonable caution before zeroing in on any particular strategy as each has its own share of pitfalls.
Thanks to our investment screens, investors can now save on time and make prudent choices to create a solid portfolio. In this screening article, we discuss a particular approach which advises investors to bet on stocks that have scaled 52-week highs.
Borrowing from the basics of Momentum investing, this technique is based on the concept of “buy high and sell higher.” Though skeptics may raise a brow on the mettle of this 52 week-high strategy, we believe that it is time-tested and can rack up sizable gains when clubbed with the right set of parameters.
Understanding the 52-Week High Trend
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.
Setting the Right Filters
Our diligent 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 24 stocks that made it through the screen:
Coherent Inc. (COHR - Free Report) designs, manufactures, and supplies electro-optical systems and medical instruments utilizing laser, precision optic and microelectronic technologies. The company beat estimates in all of the trailing four quarters, at an average of 10.0%.
Headquartered in Santa Clara, CA, Applied Materials (AMAT - Free Report) is engaged in the developing, manufacturing and marketing of semiconductor wafer fabrication equipment and related spare parts for the semiconductor industry. The company has an average positive surprise of 4.5% over the trailing four quarters.
Cambrex Corporation manufactures and markets a broad line of specialty chemicals and commodity chemical intermediates and also manufactures chemicals to customer specifications. With three beats in the trailing four quarters, the company’s average earnings beat stands at 19.8%.
Incorporated in 1959, Houston, TX-based McDermott International Inc. is an engineering and construction company, solely focused on the offshore oil and gas business. The company has a whopping average earnings surprise of 474%, beating estimates in all of the last four quarters.
Headquartered in Pennsylvania, EnerSys (ENS - Free Report) engages in the manufacturing, marketing and distribution of various industrial batteries including motive power, reserve power, aerospace and defense applications. The company has managed to beat earnings thrice in the trailing four quarters and boasts an average positive surprise of 3.0%.
Headquartered in Charlotte, NC, Bank of America Corporation (BAC - Free Report) is a financial holding company. Its banking and non-banking subsidiaries provide a diverse range of financial services and products. The company has an average positive earnings surprise of 6.4%, beating estimates in three of the last four quarters.
Insight Enterprises, Inc. (NSIT - Free Report) is a global direct marketer of computers, hardware and software, primarily catering to small-and-medium-sized businesses. The company has managed to beat earnings twice over the trailing four quarters, at an average of 4.1%.
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 »