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5 Stocks Trading Near 52-Week High That Can Climb Further
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Stocks hitting their 52-week high and delivering consistent performance in the past few quarters offer attractive opportunities to investors while building a portfolio. This is because stocks near that level are perceived to be winners. However, stocks touching a new 52-week high are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Molina Healthcare (MOH - Free Report) , Greif (GEF - Free Report) , Arrow Electronics (ARW - Free Report) , Sonoco (SON - Free Report) and Occidental Petroleum (OXY - Free Report) are expected to maintain the momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here we discuss a strategy to find the right stocks. The strategy borrows from the basics of momentum investing. This technique bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many a time, stocks hitting a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects, and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics, and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers, in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This 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.
% 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 the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our five picks of the 25 stocks that made it through the screen:
Greif is a leading global producer of industrial packaging products and services with manufacturing facilities located in over 40 countries. It offers a comprehensive line of rigid industrial packaging products and containerboard and corrugated products for niche markets in North America.
The company has been implementing price increases in response to robust demand and to combat cost inflation, which is likely to drive earnings growth in the near term. Greif's restructuring activities, which comprise optimizing and integrating operations in the Paper Packaging & Services segment, rationalizing operations and closing underperforming assets in the Global Industrial Packaging segment, will drive savings.
The company currently sports a Zacks Rank of 1 and has a VGM Score of B. The Zacks Consensus Estimate for Greif’s 2022 earnings has moved up by 17.8% to $7.66 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 22.87%.
Sonoco is a leading provider of consumer packaging, industrial products, protective packaging and packaging supply chain services. Strong recovery in price and cost across most of its businesses, robust end-market demand, the Ball Metalpack acquisition, productivity initiatives and improved volume/mix are likely to drive the company's results in the near term.
Sonoco's Consumer Packaging segment will continue to gain traction from the flexible packaging business and plastic food packaging. Its Industrial Paper Packaging segment will gain on strong demand for global tubes, cores and cones.
The company currently sports a Zacks Rank of 1 and has a VGM Score of C. The Zacks Consensus Estimate for Sonoco’s 2022 earnings has moved up by 9.9% to $5.91 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 4.06%.
Molina Healthcare is a multi-state managed care organization, participating exclusively in government-sponsored healthcare programs such as the Medicaid program and the State Children's Health Insurance Program (SCHIP), catering to low-income persons. It is a FORTUNE 500 company. The company began an enterprise-wide restructuring program to streamline its structure to improve operational efficiency.
While the Medicaid business is likely to gain on the back of higher membership and continuous buyouts, organic gains and strength exhibited by MOH’s D-SNP and MAPD products are expected to provide a boost to its Medicare business.
The company currently carries a Zacks Rank of 2 (Buy) and has a VGM Score of A. The Zacks Consensus Estimate for Molina Healthcare’s 2022 earnings has moved up by 0.3% to $17.19 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 1.51%.
Arrow Electronics is one of the world’s largest distributors of electronic components and enterprise computing products. The company is benefiting from robust demand for its software, cloud and security solutions, and efficient supply-chain management.
Strong momentum in infrastructure software, next-generation hardware and hybrid cloud architectures is encouraging as well. Continued focus on boosting internet of things capabilities is helping the company expand in newer markets and gain customers.
The company currently carries a Zacks Rank of 2 and has a VGM Score of B. The Zacks Consensus Estimate for Arrow Electronics’ 2022 earnings has remained steady at $21.59 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 17.73%.
Occidental Petroleum is an integrated oil and gas company, with significant exploration and production exposure. The company continues to increase production from its high-quality asset holdings and lower its outstanding debts through proceeds from non-core assets sale.
The acquisition of Anadarko, investment in infrastructure and its Permian Basin exposure continue to boost the company’s performance. The company has achieved its $10-billion divestiture goal through non-core assets sale. It is working consistently to strengthen the balance sheet and has been successful in extending near-term $7-billion debt maturity beyond 2025.
The company currently carries a Zacks Rank of 2 and has a VGM Score of A. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has moved up 7.9% to $10.67 per share in the past 60 days.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
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.
Image: Bigstock
5 Stocks Trading Near 52-Week High That Can Climb Further
Stocks hitting their 52-week high and delivering consistent performance in the past few quarters offer attractive opportunities to investors while building a portfolio. This is because stocks near that level are perceived to be winners. However, stocks touching a new 52-week high are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Molina Healthcare (MOH - Free Report) , Greif (GEF - Free Report) , Arrow Electronics (ARW - Free Report) , Sonoco (SON - Free Report) and Occidental Petroleum (OXY - Free Report) are expected to maintain the momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here we discuss a strategy to find the right stocks. The strategy borrows from the basics of momentum investing. This technique bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many a time, stocks hitting a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects, and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics, and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers, in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This 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.
% 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 the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our five picks of the 25 stocks that made it through the screen:
Greif is a leading global producer of industrial packaging products and services with manufacturing facilities located in over 40 countries. It offers a comprehensive line of rigid industrial packaging products and containerboard and corrugated products for niche markets in North America.
The company has been implementing price increases in response to robust demand and to combat cost inflation, which is likely to drive earnings growth in the near term. Greif's restructuring activities, which comprise optimizing and integrating operations in the Paper Packaging & Services segment, rationalizing operations and closing underperforming assets in the Global Industrial Packaging segment, will drive savings.
The company currently sports a Zacks Rank of 1 and has a VGM Score of B. The Zacks Consensus Estimate for Greif’s 2022 earnings has moved up by 17.8% to $7.66 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 22.87%.
Sonoco is a leading provider of consumer packaging, industrial products, protective packaging and packaging supply chain services. Strong recovery in price and cost across most of its businesses, robust end-market demand, the Ball Metalpack acquisition, productivity initiatives and improved volume/mix are likely to drive the company's results in the near term.
Sonoco's Consumer Packaging segment will continue to gain traction from the flexible packaging business and plastic food packaging. Its Industrial Paper Packaging segment will gain on strong demand for global tubes, cores and cones.
The company currently sports a Zacks Rank of 1 and has a VGM Score of C. The Zacks Consensus Estimate for Sonoco’s 2022 earnings has moved up by 9.9% to $5.91 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 4.06%.
Molina Healthcare is a multi-state managed care organization, participating exclusively in government-sponsored healthcare programs such as the Medicaid program and the State Children's Health Insurance Program (SCHIP), catering to low-income persons. It is a FORTUNE 500 company. The company began an enterprise-wide restructuring program to streamline its structure to improve operational efficiency.
While the Medicaid business is likely to gain on the back of higher membership and continuous buyouts, organic gains and strength exhibited by MOH’s D-SNP and MAPD products are expected to provide a boost to its Medicare business.
The company currently carries a Zacks Rank of 2 (Buy) and has a VGM Score of A. The Zacks Consensus Estimate for Molina Healthcare’s 2022 earnings has moved up by 0.3% to $17.19 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 1.51%.
Arrow Electronics is one of the world’s largest distributors of electronic components and enterprise computing products. The company is benefiting from robust demand for its software, cloud and security solutions, and efficient supply-chain management.
Strong momentum in infrastructure software, next-generation hardware and hybrid cloud architectures is encouraging as well. Continued focus on boosting internet of things capabilities is helping the company expand in newer markets and gain customers.
The company currently carries a Zacks Rank of 2 and has a VGM Score of B. The Zacks Consensus Estimate for Arrow Electronics’ 2022 earnings has remained steady at $21.59 per share in the past 60 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 17.73%.
Occidental Petroleum is an integrated oil and gas company, with significant exploration and production exposure. The company continues to increase production from its high-quality asset holdings and lower its outstanding debts through proceeds from non-core assets sale.
The acquisition of Anadarko, investment in infrastructure and its Permian Basin exposure continue to boost the company’s performance. The company has achieved its $10-billion divestiture goal through non-core assets sale. It is working consistently to strengthen the balance sheet and has been successful in extending near-term $7-billion debt maturity beyond 2025.
The company currently carries a Zacks Rank of 2 and has a VGM Score of A. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has moved up 7.9% to $10.67 per share in the past 60 days.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
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