3 Buys Making New 52-Week Highs

Robert Weinstein

NEW YORK (TheStreet) -- Here's a question to ask yourself the next time you're on the hunt for cheap stocks: Is your goal buying a stock at a low price or buying a stock that will appreciate significantly after you buy it?

If the price you pay is more pertinent to you than the money you can make, then by all means, go ahead and look for poorly performing stocks.

But if you can move past the desire to buy a stock that is cheap compared to where it used to trade and focus on what's cheap today, you just may increase your chances of success in ways you haven't imagined.

We can all agree that stocks making new 52-week highs today have week-ago prices that now appear "cheap," even if those week-ago prices might have appeared expensive relative to where the stock was trading two weeks ago.

Wouldn't it be marvelous to have bought the stocks that are now making 52-week highs last week. Sure, and if you did, congratulations! If you didn't, here is a list of stocks near 52-week high that in hindsight were cheap last week.



Mitsubishi UFJ Financial trades an average of 3.1 million shares per day with a market cap of $97 billion.

52-Week High: $6.88

Beta: 0.79

Price-to-Book Ratio: 0.72

The Mitsubishi Group is well known for its cars and TVs, but did you know that one of the group's companies, Mitsubishi UFJ Financial, is one of the world's largest bank holding companies?

The current price action demonstrates the increasing desire to own a piece of the company too. Mitsubishi is up more than 40% from a year ago, and the daily and weekly charts are solidly bullish.

The company pays a dividend yield of 2.2%, which is like a double-stuffed cookie for long-term investors. What may initially scare some investors is the high trailing price-to-earnings ratio. The trailing P/E is a nosebleed 66, but fortunately the forward P/E is more suitable.

In this case, the forward P/E is only 15, well within my premium tolerance of 20. The average estimate for next year's earnings per share is 45 cents, down from an estimated 51 cents for the current year. Japan has been in the news a lot lately, especially the yen.


Because of the high volatility lately in the yen, I'm not surprised Japanese stocks are experiencing a lot of turbulence too. Buy on dips, but also expect Mitsubishi to test $7 soon. If the stock doesn't get higher than that in the near term, at least the dividend will buy a lot of time to wait for such a move.


DDR

DDR operates as a real estate investment trust (REIT) in the U.S. The company engages in acquiring, developing, redeveloping, owning, leasing and managing shopping centers, mini-malls and lifestyle centers. DDR trades an average of 2.6 million shares per day with a market cap of $5.7 billion.

52-Week High: $18.16

Beta: 1.51

Price-to-Book Ratio: 1.92

The main attraction for most investors buying a REIT is the dividend. DDR doesn't disappoint investors looking for yield. DDR currently pays about 3%, but you need more than 3% to make this one worthwhile.

The reason why that 3% isn't as favorable as it appears at first glance is the way in which the shares have risen. On the daily chart, they increased to the point of being overbought from a technical analysis point of view. I fear we will see these shares make a retracement before they continue higher.


Waiting for retracements also means accepting the risk of missing out on the next leg higher. Don't forget that favorable stock buys are like New York City taxis. If you miss one, another will be around soon.

If you want exposure to DDR, keep the powder dry until you get a chance to pick up shares for about $17.50. In doing so, you will reduce your risk and increase your dividend yield. If DDR continues moving higher without looking back, you can find comfort knowing that you weren't willing to take on more risk than it was worth. Besides, by the time DDR plays out, one way or another, a different opportunity will present itself.


CSX

CSX, together with its subsidiaries, provides rail-based transportation services. It offers traditional rail service and the transport of intermodal containers and trailers.

CSX trades an average of 7.8 million shares per day with a market cap of $25 billion.

52-Week High: $24.69

Beta: 1.32

Price-to-Book Ratio: 2.77

I love the chart pattern for CSX, and so do trend-followers. The fast-moving averages are rising and are above a rising 200-day moving average. This applies for both the widely watched daily chart, and for the weekly price chart that I pay closer attention to.

CSX appears ready for a breakout above the $25 level, and I wouldn't be surprised to see the shares holding above $25 by the end of summer. There is a lot of truth to the saying "buy in May and go away." But in the case of CSX, the bullish price pattern appears solid.

Lower energy prices overall should help keep more disposable income away from the gas pump and direct it toward retail purchases and products using rail for transportation. Shares of CSX have increased 8.8% in the past year. After accounting for dividends, the total gain is more than 10% from a year ago.

Analysts overall also agree with my bullish thesis. The average analyst target price for CSX is $26.63. The current dividend yield is 2.4%, and trading volume is high enough volume that options are a viable entry mechanism.

Instead of trying to time the market perfectly, you can sell put options. For example, if you sell the May $25 put for 63 cents (midpoint between the bid and ask at the time of writing), you reduce your total risk from $24.61 to $24.37.

A 1% savings may not appear to be much at first glance, but the options expire in 17 trading days. I like the May expiration because of the fast time decay, and because it allows for an entry before the next ex-dividend date.

Selling the option does limit your profit potential to 63 cents until the time of option expiration, but the shares have to trade higher than $25.24 before buying shares makes more sense. If the shares are trading at more than $25 at the time of options expiration, you won't likely get the shares put to you, but making a 2.5% return in 17 trading days isn't bad.

At the time of publication, Weinstein held no shares in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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