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Over the past few decades, trading just got a lot more challenging with the rising number of investment strategies to choose from. The plethora of options can baffle even the most seasoned investors, let alone new entrants who are trying out their luck. However, investors should exercise reasonable caution before zeroing in on any particular strategy as each has its own share of pitfalls.
However, trading like a pro is not as difficult as it seems. 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 to levels near a 52-week high.
Borrowing from the basics of Momentum investing, this technique bets on the catchphrase “buy high and sell higher.” Though skeptics have their own share of inhibitions regarding the 52 week-high investment strategy, we believe that this time-tested strategy, when clubbed with the right set of parameters, will help rake in sizable gains.
A wide group of investors today are placing their bets on stocks which are hovering around their 52 week high mark and gaining substantially from it. They smartly single out stocks that have strong upside potential but are undervalued. You can now join their ranks by following our smart 52-week high investment screen, which will help you book impressive gains.
52-Week High Stocks: What You Need to Know
Stocks near 52-week highs often instill the presumptive “adjustment and anchoring bias” 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 dominate 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 that it will outperform peers in the subsequent period. According to researchers George and Hwang, holding 52-week high stocks for six months 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 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
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 their peers.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This 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 five of the eight stocks that made it through the screen:
Leucadia National Corp. is a diversified financial services holding company focusing on personal and commercial lines of property and casualty insurance, life insurance, banking and lending and manufacturing. The company delivered an average positive earnings surprise of 179.0% over the trailing four quarters.
Idaho-based Micron Technology, Inc. (MU - Free Report) is a provider of advanced semiconductor solutions. Through its worldwide operations, the company manufactures and markets Dynamic Random Access Memory, NAND flash memory, CMOS image sensors, other semiconductor components and memory modules used in leading-edge computing, consumer, networking and mobile products. With an earnings beat in all the four quarters, the company has an average positive surprise of 31.5%.
Headquartered in Poway, CA, Cohu, Inc. (COHU - Free Report) is engaged in development, manufacturing, sale and servicing of semiconductor test and inspection handlers, micro-electro mechanical system test modules and thermal sub-systems. These are deployed by semiconductor manufacturers and test subcontractors. The company has a striking earnings surprise history with an average positive surprise of 117.9% over the trailing four quarters, beating estimates all through.
Tech Data Corporation is a leading provider of Internet technology products, logistics management and other value-added services. It distributes microcomputer hardware and software products to value-added resellers, corporate resellers, retailers, direct marketers and Internet resellers. The company boasts an average positive surprise of 8.7% over the trailing four quarters, having beaten estimates thrice.
Headquartered in Raleigh, NC, BMC Stock Holdings, Inc. provides diversified building products and services to professional builders and contractors, primarily in the residential housing market. The company has an impressive average positive surprise of 132.4%, beating estimates three out of the four trailing quarters.
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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5 Stocks Near 52-Week High that Make Solid Bets
Over the past few decades, trading just got a lot more challenging with the rising number of investment strategies to choose from. The plethora of options can baffle even the most seasoned investors, let alone new entrants who are trying out their luck. However, investors should exercise reasonable caution before zeroing in on any particular strategy as each has its own share of pitfalls.
However, trading like a pro is not as difficult as it seems. 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 to levels near a 52-week high.
Borrowing from the basics of Momentum investing, this technique bets on the catchphrase “buy high and sell higher.” Though skeptics have their own share of inhibitions regarding the 52 week-high investment strategy, we believe that this time-tested strategy, when clubbed with the right set of parameters, will help rake in sizable gains.
A wide group of investors today are placing their bets on stocks which are hovering around their 52 week high mark and gaining substantially from it. They smartly single out stocks that have strong upside potential but are undervalued. You can now join their ranks by following our smart 52-week high investment screen, which will help you book impressive gains.
52-Week High Stocks: What You Need to Know
Stocks near 52-week highs often instill the presumptive “adjustment and anchoring bias” 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 dominate 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 that it will outperform peers in the subsequent period. According to researchers George and Hwang, holding 52-week high stocks for six months 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 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
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 their peers.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This 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 five of the eight stocks that made it through the screen:
Leucadia National Corp. is a diversified financial services holding company focusing on personal and commercial lines of property and casualty insurance, life insurance, banking and lending and manufacturing. The company delivered an average positive earnings surprise of 179.0% over the trailing four quarters.
Idaho-based Micron Technology, Inc. (MU - Free Report) is a provider of advanced semiconductor solutions. Through its worldwide operations, the company manufactures and markets Dynamic Random Access Memory, NAND flash memory, CMOS image sensors, other semiconductor components and memory modules used in leading-edge computing, consumer, networking and mobile products. With an earnings beat in all the four quarters, the company has an average positive surprise of 31.5%.
Headquartered in Poway, CA, Cohu, Inc. (COHU - Free Report) is engaged in development, manufacturing, sale and servicing of semiconductor test and inspection handlers, micro-electro mechanical system test modules and thermal sub-systems. These are deployed by semiconductor manufacturers and test subcontractors. The company has a striking earnings surprise history with an average positive surprise of 117.9% over the trailing four quarters, beating estimates all through.
Tech Data Corporation is a leading provider of Internet technology products, logistics management and other value-added services. It distributes microcomputer hardware and software products to value-added resellers, corporate resellers, retailers, direct marketers and Internet resellers. The company boasts an average positive surprise of 8.7% over the trailing four quarters, having beaten estimates thrice.
Headquartered in Raleigh, NC, BMC Stock Holdings, Inc. provides diversified building products and services to professional builders and contractors, primarily in the residential housing market. The company has an impressive average positive surprise of 132.4%, beating estimates three out of the four trailing quarters.
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 »