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4 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 Unum Group (UNM - Free Report) , Graphic Packaging Holding Company (GPK - Free Report) , AutoNation (AN - Free Report) and Sanofi (SNY - 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 or 2
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) or #2 (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 four picks of the 23 stocks that made it through the screen:
Graphic Packaging Holding Company provides fiber-based packaging to food, beverage, foodservice and other consumer products companies in the Americas, Europe and the Asia Pacific. Graphic Packaging made a big strategic acquisition in 2021 and bought AR Packaging, thereby expanding its reach to Europe. The company continues to develop innovative packaging solutions, which along with solid demand, strong pricing and improving productivity, are contributing to year upon year of stronger-than-expected sales growth. Since it caters to the market for essential goods, its good fortunes should extend into the foreseeable future.
The company currently has a Zacks Rank of 1. The Zacks Consensus Estimate for GPK’s 2023 earnings has moved north by 0.4% to $2.75 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.25%.
Unum Group was created following the June 1999 merger of Provident Companies, Inc. and Unum Corporation. Along with disability insurance, the company provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services. Unum’s conservative pricing and reservation practices have contributed to overall profitability. Sustained increase in premiums is fueled by high persistency levels in core business and strong sales volume along with solid benefits experience. Geographic expansion has been paying off as acquired dental insurance businesses are growing in the United States and the U.K. We believe strong operating results have led to a solid level of statutory earnings and capital, boosting financial flexibility.
The company currently has a Zacks Rank of 1. The Zacks Consensus Estimate for UNM’s 2023 earnings has moved north by 0.9% to $6.72 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 32.25%.
AutoNation's diversified product mix and multiple streams of income reduce risk profile and augur well for earnings and sales growth. The company's 2021 buyouts of Priority 1 Automotive and Peacock Automotive’s 11 dealerships are set to add $380 million and $420 million in annualized revenues, respectively. Enhanced digital solutions have helped AutoNation to further boost profitability and market presence. Initiatives like ship-to-home next day, curb-side pick-up option, and buy online, pick-up in stores options are picking pace, driving additional traffic to the company’s online site. Its robust share repurchase program and digitization efforts are commendable.
The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for AN’s 2023 earnings has moved north by 0.2% to $20.73 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 4.76%.
Sanofi manufactures and markets prescription drugs in Europe, the United States and other countries. It focuses on major therapeutic areas such as immunology, neurology, oncology, rare disease, rare blood disorders and diabetes, among others. Sanofi’s Specialty Care unit is on a strong footing, particularly with the regular label expansion of Dupixent, which has become the key top-line driver for Sanofi. With outside U.S. revenues accelerating and multiple approvals for new indications, its sales are expected to be higher. Sanofi possesses a leading vaccine portfolio. Its R&D pipeline is strong. Several data readouts are expected in 2023. It has also launched several new drugs in the past couple of years and is expanding its pipeline through M&A deals.
The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for SNY’s 2023 earnings has moved north by 0.2% to $4.41 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 7.68%.
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
4 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 Unum Group (UNM - Free Report) , Graphic Packaging Holding Company (GPK - Free Report) , AutoNation (AN - Free Report) and Sanofi (SNY - 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 or 2
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) or #2 (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 four picks of the 23 stocks that made it through the screen:
Graphic Packaging Holding Company provides fiber-based packaging to food, beverage, foodservice and other consumer products companies in the Americas, Europe and the Asia Pacific. Graphic Packaging made a big strategic acquisition in 2021 and bought AR Packaging, thereby expanding its reach to Europe. The company continues to develop innovative packaging solutions, which along with solid demand, strong pricing and improving productivity, are contributing to year upon year of stronger-than-expected sales growth. Since it caters to the market for essential goods, its good fortunes should extend into the foreseeable future.
The company currently has a Zacks Rank of 1. The Zacks Consensus Estimate for GPK’s 2023 earnings has moved north by 0.4% to $2.75 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.25%.
Unum Group was created following the June 1999 merger of Provident Companies, Inc. and Unum Corporation. Along with disability insurance, the company provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services. Unum’s conservative pricing and reservation practices have contributed to overall profitability. Sustained increase in premiums is fueled by high persistency levels in core business and strong sales volume along with solid benefits experience. Geographic expansion has been paying off as acquired dental insurance businesses are growing in the United States and the U.K. We believe strong operating results have led to a solid level of statutory earnings and capital, boosting financial flexibility.
The company currently has a Zacks Rank of 1. The Zacks Consensus Estimate for UNM’s 2023 earnings has moved north by 0.9% to $6.72 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 32.25%.
AutoNation's diversified product mix and multiple streams of income reduce risk profile and augur well for earnings and sales growth. The company's 2021 buyouts of Priority 1 Automotive and Peacock Automotive’s 11 dealerships are set to add $380 million and $420 million in annualized revenues, respectively. Enhanced digital solutions have helped AutoNation to further boost profitability and market presence. Initiatives like ship-to-home next day, curb-side pick-up option, and buy online, pick-up in stores options are picking pace, driving additional traffic to the company’s online site. Its robust share repurchase program and digitization efforts are commendable.
The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for AN’s 2023 earnings has moved north by 0.2% to $20.73 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 4.76%.
Sanofi manufactures and markets prescription drugs in Europe, the United States and other countries. It focuses on major therapeutic areas such as immunology, neurology, oncology, rare disease, rare blood disorders and diabetes, among others. Sanofi’s Specialty Care unit is on a strong footing, particularly with the regular label expansion of Dupixent, which has become the key top-line driver for Sanofi. With outside U.S. revenues accelerating and multiple approvals for new indications, its sales are expected to be higher. Sanofi possesses a leading vaccine portfolio. Its R&D pipeline is strong. Several data readouts are expected in 2023. It has also launched several new drugs in the past couple of years and is expanding its pipeline through M&A deals.
The company currently has a Zacks Rank of 2. The Zacks Consensus Estimate for SNY’s 2023 earnings has moved north by 0.2% to $4.41 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 7.68%.
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/.