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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 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 UFP Industries (UFPI - Free Report) , Dave & Buster's Entertainment (PLAY - Free Report) , Unum Group (UNM - Free Report) , Consolidated Water (CWCO - Free Report) and Vertiv (VRT - Free Report) are expected to maintain 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.
In fact, overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay a 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 >= .08
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 0.08 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 Zacks Rank #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 five picks of the 27 stocks that made it through the screen:
UFP Industries is a holding company with subsidiaries throughout North America, Europe, Asia and Australia. The company supplies wood, wood composite and other products in retail, industrial and construction markets. The company has been benefiting from its investments in product and service enhancements and innovations to create value for customers. Also, accretive acquisition strategies and a strong liquidity position bode well. Its focus on building strength in UFP Packaging is an added positive. It expects to gain from the existing product portfolio, initiatives to better production efficiency and solid growth opportunities in the industrial market.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for UFPI’s 2023 earnings has remained steady at $8.29 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 22.73%.
Dave & Buster's Entertainment is a leading owner and operator of high-volume venues in North America that combines dining and entertainment for both adults and families. Dave & Buster's continues to pursue a disciplined new store growth strategy in new and existing markets to drive growth. Management believes it can grow the concept to more than 200 units in the North and have significant appeal in certain international markets.
In fiscal 2023, the company intends to open 16 new stores (including 11 Dave & Buster's and 5 Main Event locations) and relocate Dave & Buster's Vernon Hills store. The company recently inked a deal with the Malpani Group to open 15 new stores in India. Also, it partnered with the NightOwl Entertainment Group to open five stores in Australia. These strategic moves mark the company’s second and third multi-store franchise agreements, respectively, in the APAC and MEA regions.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PLAY’s fiscal 2023 earnings has increased 11.9% to $3.56 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 6.81%.
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, and 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 UK. 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 1.2% to $7.49 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 18.61%.
Consolidated Water Co., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or non-existent. The company is poised to benefit from rising demand for desalination units, given its expertise in the field. It is expanding operations via acquisitions and organic projects. The acquisition of full ownership of PERC and the return of tourism to the Cayman Islands are expected to drive earnings. The company has enough liquidity to address its short-term debt obligations.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PLAY’s fiscal 2023 earnings has increased 1% to 97 cents per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same twice, the average negative surprise being 9.91%.
Vertiv Holdings specializes in designing, manufacturing and servicing critical digital infrastructure technologies and life cycle services. The firm aims to help its clients deal with critical issues facing data centers, communication networks and commercial and industrial facilities through its portfolio of power, cooling and IT infrastructure solutions and services. Its products are used in social media, finance, healthcare, transportation, retail, education and government sectors.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for VRT’s 2023 earnings has increased 0.8% to $1.25 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same once and matching the once, the average surprise being 11.01%.
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 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 UFP Industries (UFPI - Free Report) , Dave & Buster's Entertainment (PLAY - Free Report) , Unum Group (UNM - Free Report) , Consolidated Water (CWCO - Free Report) and Vertiv (VRT - Free Report) are expected to maintain 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.
In fact, overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay a 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 >= .08
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 0.08 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 Zacks Rank #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 five picks of the 27 stocks that made it through the screen:
UFP Industries is a holding company with subsidiaries throughout North America, Europe, Asia and Australia. The company supplies wood, wood composite and other products in retail, industrial and construction markets. The company has been benefiting from its investments in product and service enhancements and innovations to create value for customers. Also, accretive acquisition strategies and a strong liquidity position bode well. Its focus on building strength in UFP Packaging is an added positive. It expects to gain from the existing product portfolio, initiatives to better production efficiency and solid growth opportunities in the industrial market.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for UFPI’s 2023 earnings has remained steady at $8.29 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 22.73%.
Dave & Buster's Entertainment is a leading owner and operator of high-volume venues in North America that combines dining and entertainment for both adults and families. Dave & Buster's continues to pursue a disciplined new store growth strategy in new and existing markets to drive growth. Management believes it can grow the concept to more than 200 units in the North and have significant appeal in certain international markets.
In fiscal 2023, the company intends to open 16 new stores (including 11 Dave & Buster's and 5 Main Event locations) and relocate Dave & Buster's Vernon Hills store. The company recently inked a deal with the Malpani Group to open 15 new stores in India. Also, it partnered with the NightOwl Entertainment Group to open five stores in Australia. These strategic moves mark the company’s second and third multi-store franchise agreements, respectively, in the APAC and MEA regions.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PLAY’s fiscal 2023 earnings has increased 11.9% to $3.56 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 6.81%.
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, and 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 UK. 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 1.2% to $7.49 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 18.61%.
Consolidated Water Co., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or non-existent. The company is poised to benefit from rising demand for desalination units, given its expertise in the field. It is expanding operations via acquisitions and organic projects. The acquisition of full ownership of PERC and the return of tourism to the Cayman Islands are expected to drive earnings. The company has enough liquidity to address its short-term debt obligations.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PLAY’s fiscal 2023 earnings has increased 1% to 97 cents per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same twice, the average negative surprise being 9.91%.
Vertiv Holdings specializes in designing, manufacturing and servicing critical digital infrastructure technologies and life cycle services. The firm aims to help its clients deal with critical issues facing data centers, communication networks and commercial and industrial facilities through its portfolio of power, cooling and IT infrastructure solutions and services. Its products are used in social media, finance, healthcare, transportation, retail, education and government sectors.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for VRT’s 2023 earnings has increased 0.8% to $1.25 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same once and matching the once, the average surprise being 11.01%.
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