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The movement of stocks scaling 52-week highs or hitting lows is closely monitored on a daily basis. Now, the question is, how important such stock movements are to investors.
Betting on a stock near its 52-week high has its own pitfalls as there is a possibility of it scaling higher or going downhill without forewarning. One of the relatively new entries in the investing rulebook, the 52-week strategy, relies on the mantra, buy high and sell higher.
A wide group of investors are placing their bets on stocks which are near their 52-week high mark but are still undervalued with strong upside potential. While market analysts may be divided in their opinion regarding the 52-week high investment technique, many of them believe that 52-week high stocks, which are presently undervalued, can be lucrative bets.
An Insight Into 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 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 seven of the 21 stocks that made it through the screen:
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 the last four quarters, the company has an average positive surprise of 10.98%.
Dana Incorporated (DAN - Free Report) is a manufacturer and seller of driveline, sealing and thermal-management products for vehicle manufacturers. The company has an average four-quarter positive earnings surprise of 38.94%.
Synnex Corporation (SNX - Free Report) is a global information technology supply chain services company offering a comprehensive range of services to original equipment manufacturers, software publishers and reseller customers worldwide. The company has an average positive earnings surprise of 14.5% for the trailing four quarters.
Malvern, PA-based Vishay Intertechnology Inc. (VSH - Free Report) is a global manufacturer and supplier of discrete semiconductors and passive components. We note that the company has beaten the Zacks Consensus Estimate thrice in the preceding four quarters, delivering an average positive earnings surprise of 5.97%.
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 three of the trailing four quarters, the average being 14.98%.
Based in Fremont, CA, Lam Research Corporation (LRCX - Free Report) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company has an average four-quarter positive earnings surprise of 5.33%.
Headquartered in Mayfield Heights, OH, Ferro Corporation produces specialty materials in the United States and internationally. The company’s offerings include frits, porcelain and other glass enamels, which are used in building and renovation, electronic appliances, household furnishings and other industrial products. The company has an average positive earnings surprise of 17.79%, beating estimates each time in the last four 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 »
Unique Zacks Analysis of Your Chosen Ticker
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7 Stocks Near 52-Week High That Can Scale Higher
The movement of stocks scaling 52-week highs or hitting lows is closely monitored on a daily basis. Now, the question is, how important such stock movements are to investors.
Betting on a stock near its 52-week high has its own pitfalls as there is a possibility of it scaling higher or going downhill without forewarning. One of the relatively new entries in the investing rulebook, the 52-week strategy, relies on the mantra, buy high and sell higher.
A wide group of investors are placing their bets on stocks which are near their 52-week high mark but are still undervalued with strong upside potential. While market analysts may be divided in their opinion regarding the 52-week high investment technique, many of them believe that 52-week high stocks, which are presently undervalued, can be lucrative bets.
An Insight Into 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 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 seven of the 21 stocks that made it through the screen:
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 the last four quarters, the company has an average positive surprise of 10.98%.
Dana Incorporated (DAN - Free Report) is a manufacturer and seller of driveline, sealing and thermal-management products for vehicle manufacturers. The company has an average four-quarter positive earnings surprise of 38.94%.
Synnex Corporation (SNX - Free Report) is a global information technology supply chain services company offering a comprehensive range of services to original equipment manufacturers, software publishers and reseller customers worldwide. The company has an average positive earnings surprise of 14.5% for the trailing four quarters.
Malvern, PA-based Vishay Intertechnology Inc. (VSH - Free Report) is a global manufacturer and supplier of discrete semiconductors and passive components. We note that the company has beaten the Zacks Consensus Estimate thrice in the preceding four quarters, delivering an average positive earnings surprise of 5.97%.
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 three of the trailing four quarters, the average being 14.98%.
Based in Fremont, CA, Lam Research Corporation (LRCX - Free Report) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company has an average four-quarter positive earnings surprise of 5.33%.
Headquartered in Mayfield Heights, OH, Ferro Corporation produces specialty materials in the United States and internationally. The company’s offerings include frits, porcelain and other glass enamels, which are used in building and renovation, electronic appliances, household furnishings and other industrial products. The company has an average positive earnings surprise of 17.79%, beating estimates each time in the last four 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 »