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5 Stocks Trading Near 52-Week High That Can Scale Higher
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Investors generally consider a 52-week high as a good criterion to determine an entry or exit point for a given stock. However, stocks touching new 52-week highs 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 PACCAR (PCAR - Free Report) , Cboe Global Markets (CBOE - Free Report) , MRC Global (MRC - Free Report) , Applied Industrial Technologies (AIT - Free Report) and RPM International (RPM - 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 technique borrows from the basics of momentum investing and 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:
PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. The new DAF lineup, comprising XF, XG and XD models, augurs well. New product launches are set to translate into an improved mix in 2023. Fourth-quarter truck deliveries are estimated to increase sequentially, which will aid the top line. Also, fourth-quarter gross margins from Truck, Parts and Others imply a sequential improvement. The company's accelerated efforts toward electrification and connected vehicle services are praiseworthy.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PACCAR’s 2022 earnings has remained steady at $8.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 12.61%.
Cboe Global Markets is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. It eyes strategic acquisitions to gain a competitive edge by diversifying, adding capabilities to its portfolio, generating expense synergies and venturing into new markets, and projects organic net revenue growth to be 14% to 16% in 2022. Cboe Global explores new markets like the Middle East, Scandinavia and Asia. Trading volume growth should continue to drive transaction fee. Strong liquidity has been aiding capital deployment.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for Cboe Global Markets’ 2022 earnings has moved up 1.5% to $6.78 per share in the past 30 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 4.92%.
MRC Global is one of the leading distributors of pipes, valves and fittings, and related products and services. The company is poised to benefit from strength in its gas utilities sector due to long-term market drivers like distribution integrity upgrade programs and new home construction. The DIET sector is likely to gain from new energy transition-related projects, project turnaround activity along with maintenance, repair and operations activities. The company’s focus on expanding market share, enhancing profitability and boosting working capital efficiency is encouraging.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for MRC Global’s 2022 earnings has moved up by 16.2% to $1.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matching the same on one occasion and missing the same on the other, the average surprise being 102.98%.
RPM International manufactures and markets high-performance coatings, sealants and specialty chemicals, primarily for maintenance and improvement applications. The company is benefiting from the improvement in the construction and industrial maintenance activity, a rebound in energy markets and its focus on investments in the fastest-growing areas of its business. RPM intends to increase prices of certain raw materials, labor and packaging to forgo unprecedented supply-chain and inflationary woes.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for RPM International’s 2022 earnings has remained steady at $4.60 per share in the past 30 days. The company missed the Zacks Consensus Estimate twice in the trailing four quarters while surpassing the same on two occasions, the average surprise being 7.34%.
Applied Industrial Technologies is a distributor of value-added industrial products, including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. The company is poised to benefit from improving demand for its products and solutions along with healthy cross-selling actions and growth investments. Strength across mining, metals, agriculture, chemicals, technology, food & beverage and machinery markets are benefiting its Engineered Solutions segment. The company will likely benefit from its focus on improving the product line, value-added services and initiatives to drive operational excellence as well as cost-saving efforts in the long term.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for Applied Industrial Technologies’ 2022 earnings has remained steady at $7.52 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 24.77%.
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 Research Wizard trial 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 Scale Higher
Investors generally consider a 52-week high as a good criterion to determine an entry or exit point for a given stock. However, stocks touching new 52-week highs 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 PACCAR (PCAR - Free Report) , Cboe Global Markets (CBOE - Free Report) , MRC Global (MRC - Free Report) , Applied Industrial Technologies (AIT - Free Report) and RPM International (RPM - 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 technique borrows from the basics of momentum investing and 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:
PACCAR is one of the leading names in the trucking business, with reputed brands like Kenworth, Peterbilt and DAF. The new DAF lineup, comprising XF, XG and XD models, augurs well. New product launches are set to translate into an improved mix in 2023. Fourth-quarter truck deliveries are estimated to increase sequentially, which will aid the top line. Also, fourth-quarter gross margins from Truck, Parts and Others imply a sequential improvement. The company's accelerated efforts toward electrification and connected vehicle services are praiseworthy.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PACCAR’s 2022 earnings has remained steady at $8.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 12.61%.
Cboe Global Markets is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. It eyes strategic acquisitions to gain a competitive edge by diversifying, adding capabilities to its portfolio, generating expense synergies and venturing into new markets, and projects organic net revenue growth to be 14% to 16% in 2022. Cboe Global explores new markets like the Middle East, Scandinavia and Asia. Trading volume growth should continue to drive transaction fee. Strong liquidity has been aiding capital deployment.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for Cboe Global Markets’ 2022 earnings has moved up 1.5% to $6.78 per share in the past 30 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 4.92%.
MRC Global is one of the leading distributors of pipes, valves and fittings, and related products and services. The company is poised to benefit from strength in its gas utilities sector due to long-term market drivers like distribution integrity upgrade programs and new home construction. The DIET sector is likely to gain from new energy transition-related projects, project turnaround activity along with maintenance, repair and operations activities. The company’s focus on expanding market share, enhancing profitability and boosting working capital efficiency is encouraging.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for MRC Global’s 2022 earnings has moved up by 16.2% to $1.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while matching the same on one occasion and missing the same on the other, the average surprise being 102.98%.
RPM International manufactures and markets high-performance coatings, sealants and specialty chemicals, primarily for maintenance and improvement applications. The company is benefiting from the improvement in the construction and industrial maintenance activity, a rebound in energy markets and its focus on investments in the fastest-growing areas of its business. RPM intends to increase prices of certain raw materials, labor and packaging to forgo unprecedented supply-chain and inflationary woes.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for RPM International’s 2022 earnings has remained steady at $4.60 per share in the past 30 days. The company missed the Zacks Consensus Estimate twice in the trailing four quarters while surpassing the same on two occasions, the average surprise being 7.34%.
Applied Industrial Technologies is a distributor of value-added industrial products, including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. The company is poised to benefit from improving demand for its products and solutions along with healthy cross-selling actions and growth investments. Strength across mining, metals, agriculture, chemicals, technology, food & beverage and machinery markets are benefiting its Engineered Solutions segment. The company will likely benefit from its focus on improving the product line, value-added services and initiatives to drive operational excellence as well as cost-saving efforts in the long term.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for Applied Industrial Technologies’ 2022 earnings has remained steady at $7.52 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion, the average surprise being 24.77%.
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 Research Wizard trial 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/.