Find 'Strong Buy' Stocks Near their Highs for February
The market fell on Monday, dragged lower by giants from Tesla to Apple. The selling to start the week pushed the Nasdaq back below its 200-day moving average shortly after it finally managed to climb above the key level for the first time in roughly a year late last week.
Buyers were back in again on Tuesday as the bulls continue charging higher despite the unknowns presented by another huge week of corporate earnings and the Fed’s FOMC meeting that ends on Wednesday, February 1.
As of mid-day, the bulls had driven the Nasdaq back above its 200-day once again, with the S&P 500 riding higher above its 200-day and 50-day and extending its climb over 4000, which has acted as the bullish line in the sand recently.
The broadly upbeat start to the busy part of quarterly earnings season suggests that Wall Street thinks the earnings downturn is already mostly priced in. If the outlook for earnings does indeed hold up, the market could easily extend its recent bullishness.
Plus, Wall Street feels the Fed is all but certain to roll out a 0.25% rate hike. The projected February hike puts the Fed just 0.50% away from its projected peak rate. Given this backdrop, investors appear convinced that a Fed pivot is on the horizon sooner than later.
With this in mind, investors likely want to buy stocks for February and beyond. That said, some investors might not yet be ready to jump back into all the beaten-down tech names and growth plays.
Instead, investors might want to stick with what’s worked during the rough 2022 and in January. Let’s explore a Zacks screen that helps investors find ‘Strong Buy’ stocks trading near their highs as we head into February…
Don't Be Afraid of New Highs
Some investors might prefer not to buy stocks at new highs. But if somebody asked you what the best stocks in your portfolio are, it’s likely you would name the stocks moving up the most.
The most basic idea is that the winners in your portfolio are the ones going up. If a stock is underperforming the market or going down, you'll quickly identify it as one of your worst holdings. Therefore, it makes sense that some of these stocks will be reaching new highs along the way.
Many investors are hesitant to buy stocks making new 52-week highs. But there really isn’t any reason to be. Some may worry that they have already missed the mark at that point, or that now it has more room to fall. Still, a stock making a new 52-week high is a ‘good thing,’ just as one falling to a new 52-week low is a ‘bad thing.’
On top of that, would the person who doesn’t want to buy stocks making new highs be upset if a stock they owned broke out to a new 52-week high? Statistics have also shown that stocks making new highs have a tendency of making even higher highs. And aren’t these the stocks we all dream about?
Now obviously, the fundamentals need to be there, and you should try to keep an eye on valuations. But if you were in a stock making new highs and cheering it on, it seems odd to be afraid of one doing the same just because you haven't bought it yet.
Think about this: A stock just made a new-52 week high, which is great news. Guess what? Last year it made a new 52-week high as well. And the year before that. And the year before that. Can you imagine all the money you'd be leaving on the table if you were afraid of being in stocks every time they made a new high?
Parameters
• Current Price/52-Week High greater than or equal to .80
• Percent Change in Price over 12 Weeks greater than 0
• Percent Change in Price over 4 Weeks greater than 0
• Zacks Rank equal to 1
• Price/Sales Ratio less than or equal to Industry Median
• P/E (using F1 Estimates) less than or equal to Industry Median
• Projected One Year EPS Growth F(1)/F(0) greater than or equal to Industry Median
• Current Avg. 20-Day Volume greater than Previous Week's Avg. 20-Day Volume
• All of the above parameters are applied to stocks with a Price greater than or equal to $5 and an Average 20-Day Volume of greater than or equal to 100,000 shares.
• Percent Change in Price over 12 Weeks + Percent Change in Price over 4 Weeks equal to Top # 5
Here are two of the five stocks that made it through today’s screen…
Jabil (JBL)
Jabil provides manufacturing services. The firm’s client list includes the likes of Apple, SolarEdge, and other giants in critical and game-changing industries. JBL works with hundreds of the biggest brands in the world to help make everything from smartphones and home appliances to healthcare tech.
Jabil’s diversification has helped it grow steadily for years, including 14% growth in its fiscal 2022. JBL topped our Q1 FY23 estimates in mid-December and upped its guidance once again to help it land a Zacks Rank #1 (Strong Buy) right now.
JBL shares surged to new highs last week. Jabil stock is now up 26% in the past year to crush the Zacks tech sector, including a 19% climb in the trailing three months. Jabil has now outpaced the Zack tech sector over the last 10 years, up 305% vs. 198%. Despite the run, JBL’s valuation is still highly attractive compared to its own history.
Collegium Pharmaceutical (COLL)
Collegium is a diversified specialty pharmaceutical firm. Collegium’s wider goal it to deliver medicines that help improve the lives of people living with serious medical conditions. The firm’s product offerings include Xtampza ER (oxycodone), which is indicated for the management of severe around-the-clock pain, as well as Belbuca (buprenorphine buccal film) and others. Collegium executives expect 2023 to be a “banner year,” driven by Xtampza ER and Belbuca.
Collegium’s board of directors authorized a new share repurchase program for 2023 to repurchase up to $100 million in common stock. Zacks estimates call for COLL’s revenue to climb 65% in FY22 and another 24% next year to help boost its adjusted earnings from $0.34 a share to $4.24 in FY22 and then climb 47% higher. Collegium’s positive earnings revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now.
Collegium shares have soared 21% in 2023 to hit fresh highs. The recent climb is part of a 65% surge higher over the past six months to see it crush its industry. Despite the run, Collegium still trades 18% below its average Zacks price target.
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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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