5 Stocks Trading Near 52-Week High That Can Climb Further
Stocks hitting their 52-week high and delivering consistent performance 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 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 The Goodyear Tire & Rubber Company GT, Casey's General Stores CASY, Synovus Financial SNV, Arch Resources ARCH and The Bank of New York Mellon BK are expected to maintain their momentum and keep scaling new highs. Extensive 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 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.
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 >= .8
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 0.11 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
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 >= 8
This parameter will help screen stocks that are trading at $8 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 five stocks of the 11 that made it through the screen:
The Goodyear Tire & Rubber Company is one of the largest tire manufacturing companies in the world. In addition to selling tires, Goodyear provides other rubber-related chemicals while also offering repair and other services.
With the acquisition of Cooper Tire, Goodyear has strengthened its leadership position in the U.S. market as well as expanded its foothold in the global tire industry. The Goodyear Forward plan, designed to optimize portfolio, enhance margins and reduce leverage, aims to unlock significant value for shareholders. Encouragingly, Goodyear expects operating margins to double by 2025-end. The company's electrification strides also augur well.
The Zacks Consensus Estimate for GT’s 2023 earnings has gained 40% in the past 30 days to 7 cents per share. The company surpassed the Zacks Consensus Estimate once in the trailing four quarters while missing the same thrice, the average surprise being 76.39%.
Casey's General Stores operates convenience stores under the Casey's and Casey's General Store names in 16 states, mainly Iowa, Missouri and Illinois. Casey's offers a comprehensive range of products and services to meet the needs of its customers. In addition to fuel, the stores provide a wide variety of merchandise, including groceries, prepared food, snacks, beverages, tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive supplies.
The company’s business operating model, omnichannel capabilities, enhanced customer reach and private-label offerings reinforce its position in the industry. Casey's price and product optimization strategies, increased penetration of private brands, and digital engagements are also commendable. The company’s focus on inventory management, technology advancements and data analytics positions it well for future growth.
The Zacks Consensus Estimate for CASY’s fiscal 2024 earnings has increased 1% to $12.64 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 17.79%.
Synovus Financial is a diverse financial services company, which conducts its banking operations through Synovus Bank. Synovus’ organic growth is supported by its relationship banking model. Loans and deposits witnessed a compound annual growth rate of 5.5% and 8.8%, respectively, in the last three years (2019-2022).
Its deposits are well diversified across industries and geographies in Southeast regions. Also, the company’s floating-rate loan portfolio is well positioned in the current high interest-rate regime.
The Zacks Consensus Estimate for SNV’s 2024 earnings has increased 5.5% to $4.03 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 1.61%.
Arch Resources is one of the largest coal producers in the United States, operating nine mines across the major coal basins of the country. The company mainly produces and sells metallurgical and thermal coal. The locations of its mines and access to export facilities enable the company to ship coal worldwide.
The company commenced longwall production at the Leer South mine, which will add 3 million tons of high-quality metallurgical coal annually to its total production. The ongoing rebound in production in the steel industry will create fresh demand for met coal supplied by the company.
The Zacks Consensus Estimate for ARCH’s 2023 earnings has increased 4.7% to $27.88 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 24.45%.
The Bank of New York Mellon (popularly known as BNY Mellon) is a financial services company that has been in business since 1784. Its global client base consists of financial institutions, corporations, government agencies, endowments and foundations, and high-net-worth individuals.
Higher interest rates are expected to support BNY Mellon’s top-line growth in the near term. Also, global expansion initiatives, robust assets under management balance, business restructuring efforts, solid balance sheet and digitization of operations have aided performance.
The Zacks Consensus Estimate for BK’s 2024 earnings has increased 4.2% to $5.16 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 10.62%.
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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
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Synovus Financial Corp. (SNV) : Free Stock Analysis Report
The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
The Goodyear Tire & Rubber Company (GT) : Free Stock Analysis Report
Casey's General Stores, Inc. (CASY) : Free Stock Analysis Report
Arch Resources Inc. (ARCH) : Free Stock Analysis Report
