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5 Stocks Trading Near 52-Week High With More Upside Potential
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Investors generally consider a 52-week high a good criterion for determining 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 speculation is 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 Hasbro (HAS - Free Report) , Brinker International (EAT - Free Report) , DaVita (DVA - Free Report) , Leidos Holdings (LDOS - Free Report) and Allstate (ALL - Free Report) are expected to maintain their 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 times, stocks that hit 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 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 out of the 22 stocks that made it through the screen:
Hasbro is engaged in the design, manufacture and marketing of games and toys. The company is expected to benefit from its dedicated efforts to broaden its product range, optimize inventory management and capitalize on robust demand within the gaming sector. These strategic initiatives, coupled with the pursuit of an out-licensing strategy for select brands, are anticipated to bolster structural profitability in the near term. A heightened emphasis on implementing a more adaptable strategy, coupled with a marketing budget aimed at refining consumer targeting and amplifying its impact, is likely to play a pivotal role in bolstering the company's performance in the near term and resetting its cost structure.
The Zacks Consensus Estimate for HAS’ 2024 earnings has moved north by 11.4% to $3.61 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 surprise being 17.45%.
Brinker International owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. Chili’s is a preeminent leader in the bar & grill category of casual dining. The brand has been functioning for over 40 years.
Brinker remains steadfast in its goal to drive traffic and revenues through a range of sales-building initiatives, such as streamlining of menu and its innovation, strengthening its value proposition, better food presentation, advertising campaigns, kitchen system optimization and introduction of better service platform.
The Zacks Consensus Estimate for EAT’s fiscal 2024 earnings has moved north by 5.7% to $3.91 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 213.35%.
DaVita is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure, also known as end-stage renal disease (ESRD). The company has been expanding its global presence via its Integrated Kidney Care business. DVA has been opening and acquiring several dialysis centers both within the United States and overseas, which is promising. Per management, after years of investment and consistent year-over-year improvements in cost savings, DaVita’s Medicare Advantage contracts and Special Need Plans have now reached profitability. The strong solvency position of DVA is an added plus.
The Zacks Consensus Estimate for DVA’s 2024 earnings has increased by 2.8% to $9.49 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 29.35%.
Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. Its core capabilities include providing solutions in the fields of cybersecurity, data analytics, enterprise IT modernization, operations and logistics, sensors, collection and phenomenology, software development, and systems engineering. Organic growth due to increased sales volume from programs like hypersonics and the Sentinel, along with positive synergies from the Cobham Special Mission acquisition, is likely to aid Defense Solution’s revenues in the near term.
The Zacks Consensus Estimate for LDOS’ 2024 earnings has moved north by 7.9% to $8.37 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 23.43%.
Allstate is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States. The company’s focus on keeping up with elevated loss cost trends is commendable, given it has been pursuing rate hikes consistently to earn profits in its Auto and Homeowners business. The auto insurance business is expected to be driven by expanding earned premiums and reduced adverse non-catastrophe prior-year reserve re-estimates in the near term. Meanwhile, the homeowners’ insurance business is likely to receive a boost from improved average gross premium per policy in Allstate and National General brands.
The Zacks Consensus Estimate for ALL’s 2024 earnings has improved by 8.9% to $14.82 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 41.88%.
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 With More Upside Potential
Investors generally consider a 52-week high a good criterion for determining 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 speculation is 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 Hasbro (HAS - Free Report) , Brinker International (EAT - Free Report) , DaVita (DVA - Free Report) , Leidos Holdings (LDOS - Free Report) and Allstate (ALL - Free Report) are expected to maintain their 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 times, stocks that hit 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 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 out of the 22 stocks that made it through the screen:
Hasbro is engaged in the design, manufacture and marketing of games and toys. The company is expected to benefit from its dedicated efforts to broaden its product range, optimize inventory management and capitalize on robust demand within the gaming sector. These strategic initiatives, coupled with the pursuit of an out-licensing strategy for select brands, are anticipated to bolster structural profitability in the near term. A heightened emphasis on implementing a more adaptable strategy, coupled with a marketing budget aimed at refining consumer targeting and amplifying its impact, is likely to play a pivotal role in bolstering the company's performance in the near term and resetting its cost structure.
The Zacks Consensus Estimate for HAS’ 2024 earnings has moved north by 11.4% to $3.61 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 surprise being 17.45%.
Brinker International owns, operates, develops and franchises various restaurants under Chili’s Grill & Bar (Chili’s) and Maggiano’s Little Italy (Maggiano’s) brands. Chili’s is a preeminent leader in the bar & grill category of casual dining. The brand has been functioning for over 40 years.
Brinker remains steadfast in its goal to drive traffic and revenues through a range of sales-building initiatives, such as streamlining of menu and its innovation, strengthening its value proposition, better food presentation, advertising campaigns, kitchen system optimization and introduction of better service platform.
The Zacks Consensus Estimate for EAT’s fiscal 2024 earnings has moved north by 5.7% to $3.91 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 213.35%.
DaVita is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure, also known as end-stage renal disease (ESRD). The company has been expanding its global presence via its Integrated Kidney Care business. DVA has been opening and acquiring several dialysis centers both within the United States and overseas, which is promising. Per management, after years of investment and consistent year-over-year improvements in cost savings, DaVita’s Medicare Advantage contracts and Special Need Plans have now reached profitability. The strong solvency position of DVA is an added plus.
The Zacks Consensus Estimate for DVA’s 2024 earnings has increased by 2.8% to $9.49 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 29.35%.
Leidos Holdings is a global science and technology leader that serves the defense, intelligence, civil and health markets. Its core capabilities include providing solutions in the fields of cybersecurity, data analytics, enterprise IT modernization, operations and logistics, sensors, collection and phenomenology, software development, and systems engineering. Organic growth due to increased sales volume from programs like hypersonics and the Sentinel, along with positive synergies from the Cobham Special Mission acquisition, is likely to aid Defense Solution’s revenues in the near term.
The Zacks Consensus Estimate for LDOS’ 2024 earnings has moved north by 7.9% to $8.37 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 23.43%.
Allstate is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States. The company’s focus on keeping up with elevated loss cost trends is commendable, given it has been pursuing rate hikes consistently to earn profits in its Auto and Homeowners business. The auto insurance business is expected to be driven by expanding earned premiums and reduced adverse non-catastrophe prior-year reserve re-estimates in the near term. Meanwhile, the homeowners’ insurance business is likely to receive a boost from improved average gross premium per policy in Allstate and National General brands.
The Zacks Consensus Estimate for ALL’s 2024 earnings has improved by 8.9% to $14.82 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 41.88%.
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/.