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6 Stocks Trading Near 52-Week Highs That Can Rally Further

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Anirudha Bhagat
·6 min read
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Investors generally consider 52-week highs as a criterion to pick stocks. This is because stocks near that level are considered winners.

However, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting 52-week highs are not necessarily overpriced.

Investors, in fact, might lose out on top gainers in an attempt to avoid the steep prices.

A good stock can maintain the momentum and keep scaling new highs. So, 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, which borrows from the basics of momentum investing. This technique bets on “buy high, sell higher.”

52-Week High: A Good Indicator

Many a times, stocks hitting their 52-week highs 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 premium) has only helped reach the level. However, 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 stocks that hit 52-week highs recently (trading near the high level) with significant 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 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 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 in 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 <=2

No screening is complete without a Zacks Rank, which has proved its worth since inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have always managed to brave adversities and beat the market. 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

Inclusion of this metric ensures that there is substantial volume of shares, so trading is easier.

Here are six of the 75 stocks that made it through the screen:

Cleveland-Cliffs Inc. CLF, formerly known as Cliffs Natural Resources, is the largest producer of iron-ore pellets in North America. Currently, the company sports a Zacks Rank of 1 and recorded a trailing four-quarter earnings surprise of approximately 72%, on average.

Hologic Inc. HOLX develops, manufactures, and supplies diagnostics, medical imaging systems and surgical products, which cater to the healthcare needs of women. This Zacks #1 Ranked company delivered a trailing four-quarter earnings surprise of 45.9%, on average.

Dana Inc. DAN is a provider of technology driveline, sealing and thermal-management products. Currently, the company flaunts a Zacks Rank of 1 and witnessed a trailing four-quarter earnings surprise of 34.6%, on average.

Huntsman Corporation HUN is among the world's largest manufacturers of differentiated and commodity chemical products. Currently, the company sports a Zacks Rank of 1 and recorded a trailing four-quarter earnings surprise of 28.6%, on average.

Magna International Inc. MGA is a manufacturer and supplier of complete automotive components. The company, sporting a Zacks Rank of 1 at present, reported a trailing four-quarter earnings surprise of approximately 20.8%, on average.

Dollar Tree Inc. DLTR is an operator of discount variety stores offering merchandise and other assortments. Currently, this Zacks #1 Ranked stock came with a trailing four-quarter earnings surprise of 17.1%, on average.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

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


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Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
Hologic, Inc. (HOLX) : Free Stock Analysis Report
 
ClevelandCliffs Inc. (CLF) : Free Stock Analysis Report
 
Magna International Inc. (MGA) : Free Stock Analysis Report
 
Dana Incorporated (DAN) : Free Stock Analysis Report
 
Huntsman Corporation (HUN) : Free Stock Analysis Report
 
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