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Image: Shutterstock featured highlights DCP Midstream Partners, Herc Holdings, MRC Global and McKesson

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For Immediate Release

Chicago, IL – January 11, 2023 – Stocks in this week’s article are DCP Midstream Partners , Herc Holdings (HRI - Free Report) , MRC Global (MRC - Free Report) and McKesson (MCK - Free Report) .

4 Stocks Trading at 52-Week Highs That Can Trend 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 DCP Midstream Partners, Herc Holdings, MRC Global and McKesson 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.

Here are our four picks of the 12 stocks that made it through the screen:

DCP Midstream Partners is a leading provider of midstream services, having a fully integrated and resilient business model. Its massive network of almost 57,000 miles of pipeline infrastructure provides clients with intricate connectivity. DCP Midstream generates stable fee-based revenues, banking on its pipeline assets. The company’s ability to generate a huge amount of free cash flow from operations is impressive.

DCP strongly focuses on strengthening its balance sheet with the foremost priority of reducing debt load. In fact, in the third quarter, the partnership paid more than $300 million in absolute debt. The midstream energy player thrives on resilient earnings from its diversified portfolio, having low exposure to volatile commodity prices.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for DCP’s 2022 earnings has remained steady at $4.47 per share in the past 30 days, indicating growth of 181.1% year over year. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 25.5%.

Herc Holdings. through its subsidiary, Herc Rentals Inc. provides equipment rental suppliers primarily in North America. The company is a full-line equipment-rental supplier in commercial and residential construction, industrial and manufacturing, refineries and petrochemicals, civil infrastructure, automotive, government and municipalities, energy, remediation, emergency response, facilities, entertainment and agriculture.

Strong Equipment rental revenues due to a higher volume of equipment on rent and favorable pricing are driving the company’s growth. The company’s acquisitions of CBS Rentals and Dwight Crane have further bolstered its growth in the recent past. The CBS Rentals acquisition expands Herc Holdings’ presence in Texas. The Dwight Crane acquisition helps the company expand its entertainment-related rental portfolio.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for HRI’s 2022 earnings has remained steady at $11.4 per share in the past 30 days, indicating growth of 51.6% year over year. The company missed the Zacks Consensus Estimate in all the trailing four quarters, the average negative surprise being 5.6%.

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 carries a Zacks Rank 2. The Zacks Consensus Estimate for MRC Global’s 2022 earnings has remained steady at $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%.

McKesson is a healthcare services and information technology company. The Distribution Solutions segment caters to a wide range of customers and businesses and stands to benefit from increased generic utilization, inflation in generics, driven by several patent expirations in the next few years, and an aging population.

The company played a crucial role in the COVID-19 response efforts in the United States and abroad via the distribution of COVID-19 vaccines, ancillary supply kits, and COVID-19 tests. McKesson is well-poised for growth, backed by strategic collaborations and strength in the distribution solutions segment. The company has an encouraging outlook for 2023.

The company currently carries a Zacks Rank of 2. The Zacks Consensus Estimate MCK’s 2022 earnings has been revised upward by a penny to $24.79 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 4.79%.

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.

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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.

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