Bet On These 7 Stocks Near A 52-Week High

To make the most of the market’s recent bull run, place your bets on winning stocks that are scaling new highs. In such a market, wagering on solid momentum stocks in a timely manner can help you make some quick bucks. In this screening article, we discuss the 52-week investment strategy, which loosely borrows from the basics of Momentum investing.

One of the relatively new entries in the investing rulebook, the 52-week investment strategy, relies on the new investment mantra, “buy high and sell higher.” A wide group of investors are placing their bets on stocks which are hovering around their 52 week high mark. Also, they are opting for stocks that are currently undervalued but have strong upside potential.

However, this touch-and-go strategy should not be followed blindly without a fool-proof plan. To make the gamble worthwhile, it is imperative to club the 52-week high price criteria with a set of other parameters. Meanwhile, our 52-week high screen singles out stocks that can be counted on.

Crossing the 52-Week High Mark

Many a times, stocks nearing 52-week highs are prevented from scaling higher despite robust potential. Psychological bias on part of investors, who fear that the stocks are overvalued and a price crash is impending, prevents them from scaling higher. These investors use the 52-week high price as a reference point and value stocks against this anchor.

Prolonged under reaction makes these stocks remain undervalued. However, sooner or later, the markets get a whiff of it and investors realize that their lack of enthusiasm is unwarranted. A string of positive developments and renewed interest help stocks steer past the 52-week high bar and scale higher.

The ones who get in before the positive developments and the pricing in of growth factors benefit the most. Also, research reveals that current price levels reflect a stock’s momentum better than past changes. This implies that if a stock is trading close to its 52-week high, chances are that it will perform better in subsequent periods.

Setting the Right Filters

Our screening technique has been deployed to find 52-week high stocks that hold tremendous potential compared to their respective industries. The added parameters are strong earnings growth expectations, sturdy value metrics and positive price momentum.

These stocks are relatively undervalued compared to their peers, in terms of earnings as well as sales, which make us believe that they will maintain their rally for quite some time now.

Current Price/52 Week High >= .80

This simply 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 and is likely to touch the 52-week high mark soon.

% Change Price – 4 Weeks > 2

It ensures that the stock price has moved north over the past four weeks.

% Change Price – 12 Weeks > 2

This metric guarantees a continued upward price momentum for the stock over the past three months as well.

Price/Sales

The lower, the better.

P/E using F(1) Estimate

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 their peers.

One-Year EPS Growth F(1)/F(0) >= XIndMed

This helps choose stocks that have higher growth rates than the industry median. This is a meaningful indicator as decent earnings growth adds to investor optimism.

Zacks Rank = 1

No screening is complete without our Zacks Rank, which has proved its worth since inception. Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have at all times managed to brave adversities and beat the market. You can see Zacks Investment Research

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Written By: Zacks Investment Research