For Immediate Release
Chicago, IL – November 7, 2017 - Stocks in this week’s article Micron Technology, Inc. (MU - Free Report) , Vishay Intertechnology Inc. (VSH - Free Report) , Coherent Inc. (COHR - Free Report) , Lam Research Corporation (LRCX - Free Report) and Ferro Corporation (FOE - Free Report) .
Stocks Near 52-Week Highs That Can Scale Higher
The movement of stocks scaling 52-week highs or hitting lows is closely monitored on a daily basis. Now, the question is, how important such stock movements are to investors.
Betting on a stock near its 52-week high has its own pitfalls as there is a possibility of it scaling higher or going downhill without forewarning. One of the relatively new entries in the investing rulebook, the 52-week strategy, relies on the mantra, buy high and sell higher.
A wide group of investors are placing their bets on stocks which are near their 52-week high mark but are still undervalued with strong upside potential. While market analysts may be divided in their opinion regarding the 52-week high investment technique, many of them believe that 52-week high stocks, which are presently undervalued, can be lucrative bets.
An Insight Into 52-Week High Stocks
Stocks near 52-week highs often instill the presumptive “adjustment and anchoring bias” in the minds of investors. This principle works on the belief that investors use the 52-week high price as a reference point and value stocks against this anchor.
Many a times, such stocks are prevented from scaling higher despite robust potential due to the psychological bias of investors who fear that the stocks are overvalued and a price crash is impending.
A few of the stocks remain undervalued due to prolonged under reaction on part of investors despite bullish growth drivers. Meanwhile, news pertaining to robust sales, surging profit levels, bullish earnings prospects and strategic acquisitions can drive the stock higher.
However, when a string of positive developments dominate the market, investors find their under-reaction unwarranted and the renewed interest might drive stocks beyond the 52-week high bar. Wall Street’s fast paced trading makes it imperative for investors to step in before the market gets a whiff of it.
Also, recent academic research reveals that if a stock’s current price is near its 52-week high, there are high chances that it will outperform peers in the subsequent period. According to researchers George and Hwang, holding 52-week high stocks for six months resulted in an average monthly gain of 0.45% between 1963 and 2001. Encouragingly, this is twice the gain that can be garnered from similar momentum-based strategies.
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