How to Find 'Strong Buy' Stocks Near Their Highs Amid the Market Pullback
Stocks jumped to start the week after Friday’s big Omicron variant-focused selloff. The comeback didn’t last long, as the Dow, the S&P 500, and the Nasdaq all fell by between 1.6% to 1.9% through late afternoon trading Tuesday.
The downturn was attributed to the same new covid strain fears. Traders and Wall Street also turned their attention to Jay Powell’s comments that inflation might justify a quicker reduction in its bond purchases.
The market could experience some more selling in December, which would be healthy given how quickly the last pullback was washed away. This doesn’t mean investors with long-term outlooks should stay on the sidelines, especially considering how hard it is to time the market.
With this in mind, let’s dive into a screen that helps find highly-ranked stocks trading at or near their records. The screen could prove useful for a number of reasons…
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…
Builders FirstSource, Inc. BLDR
Builders FirstSource is one of the biggest U.S suppliers of building products, prefabricated components, and other value-added services to the professional market segment for new residential construction and repair and remodeling.
BLDR has surged roughly 95% in the last year, including a 20% run in the past month alone. Builders FirstSource stock has crushed its industry during both of these stretches and Builders FirstSource currently trades a few dollars below its recent records.
Newmark Group NMRK
Newmark Group, Inc. and its subsidiaries together are a leader in commercial real estate. NMRK boasts that it helps power every phase of the property life cycle.
Newmark Group shares have skyrocketed 125% in the last 12 months to blow away its Real Estate Operations Market’s 5% climb. NMRK’s growth outlook remains strong and it hit brand new 52-week highs last week. Newmark Group stock has slipped slightly since then, but NMRK’s consensus price target marks further upside.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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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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Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
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