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Of late, a sizable number of investors have been disregarding the past performance of a stock and have instead been focusing on the current price and the 52-week high trend. They are seemingly influenced by Wall Street’s relatively new buzzword “buy high and sell higher.”
Probably this group of investors has realized fast, after eight years of the market’s Bull Run, it will be naïve to assume that there are pockets of undervaluation waiting to be discovered. In such overvalued markets, investors should be outright cautious about where they are parking their money.
To make the most of the market’s current state, place your bets on winning stocks that are scaling new highs. In this screening article, we focus on the 52-week investment strategy, which loosely borrows from the basics of Momentum investing. This implies that if a stock is trading close to its 52-week high, chances are that it will perform better in the subsequent period.
Here, the trick lies in discovering soaring stocks that are still undervalued with strong upside potential. This strategy is a great one for investors wanting to secure high returns over a short span. To make sure, investors don’t chase fads blindly, our 52-week high investment screen will help you find stocks that are unlikely to go against the drift.
We have clubbed this with the correct set of parameters to turn the tide in your favor.
A Peek in to 52-Week High Stocks
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 stocks 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 nine stocks that made it through the screen:
Based in Chicago, IL, Telephone and Data Systems Inc. (TDS - Free Report) is a diversified telecom service provider offering wireless and wireline services in 36 states. The company owns 83% of U.S. Cellular, the seventh largest wireless operator in the U.S. subscriber-wise, serving 4.68 million customers. The company has a whopping average positive surprise of 802.4% over the trailing 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 each time over the trailing four quarters, at an average of 36.3%.
Headquartered in Boise, Idaho, Boise Cascade Company (BCC - Free Report) operates as a wood products manufacturer and building materials distributor. It has a decent earnings surprise history, beating estimates thrice over the trailing four quarters, at an average of 114.7%.
Houston, TX-based NCI Building Systems, Inc. is one of the major integrated manufacturers of metal products for the North American non-residential construction industry. The company has an average positive earnings surprise of 11.3%, with three beats over the trailing four quarters.
SYNNEX Corporation (SNX - Free Report) is a global IT supply chain services company, which offers a comprehensive range of services to original equipment manufacturers, software publishers and reseller customers across the globe. The company has managed to beat earnings estimates each time over the trailing four quarters at an average of 14.8%.
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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5 Stocks Near 52-Week High with More Room to Run
Of late, a sizable number of investors have been disregarding the past performance of a stock and have instead been focusing on the current price and the 52-week high trend. They are seemingly influenced by Wall Street’s relatively new buzzword “buy high and sell higher.”
Probably this group of investors has realized fast, after eight years of the market’s Bull Run, it will be naïve to assume that there are pockets of undervaluation waiting to be discovered. In such overvalued markets, investors should be outright cautious about where they are parking their money.
To make the most of the market’s current state, place your bets on winning stocks that are scaling new highs. In this screening article, we focus on the 52-week investment strategy, which loosely borrows from the basics of Momentum investing. This implies that if a stock is trading close to its 52-week high, chances are that it will perform better in the subsequent period.
Here, the trick lies in discovering soaring stocks that are still undervalued with strong upside potential. This strategy is a great one for investors wanting to secure high returns over a short span. To make sure, investors don’t chase fads blindly, our 52-week high investment screen will help you find stocks that are unlikely to go against the drift.
We have clubbed this with the correct set of parameters to turn the tide in your favor.
A Peek in to 52-Week High Stocks
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 stocks 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 nine stocks that made it through the screen:
Based in Chicago, IL, Telephone and Data Systems Inc. (TDS - Free Report) is a diversified telecom service provider offering wireless and wireline services in 36 states. The company owns 83% of U.S. Cellular, the seventh largest wireless operator in the U.S. subscriber-wise, serving 4.68 million customers. The company has a whopping average positive surprise of 802.4% over the trailing 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 each time over the trailing four quarters, at an average of 36.3%.
Headquartered in Boise, Idaho, Boise Cascade Company (BCC - Free Report) operates as a wood products manufacturer and building materials distributor. It has a decent earnings surprise history, beating estimates thrice over the trailing four quarters, at an average of 114.7%.
Houston, TX-based NCI Building Systems, Inc. is one of the major integrated manufacturers of metal products for the North American non-residential construction industry. The company has an average positive earnings surprise of 11.3%, with three beats over the trailing four quarters.
SYNNEX Corporation (SNX - Free Report) is a global IT supply chain services company, which offers a comprehensive range of services to original equipment manufacturers, software publishers and reseller customers across the globe. The company has managed to beat earnings estimates each time over the trailing four quarters at an average of 14.8%.
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 »