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4 Stocks Trading Near 52-Week High That Can Climb Further

Stocks hitting their 52-week high and delivering consistent performance in the past few quarters 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 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 Jabil JBL, AAR Corp. AIR, Deutsche Bank DB and Core & Main CNM are expected to maintain the momentum and keep scaling new highs.  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. The strategy borrows from the basics of momentum investing. This technique bets on “buy high, sell higher.”

52-Week High: A Good Indicator

Many a time, stocks hitting 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 >= .08

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 0.08 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 >= 5

This parameter will help screen stocks that are trading at $5 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 our four picks of the 30 stocks that made it through the screen:

Jabil is one of the largest global suppliers of electronic manufacturing services. The company is benefiting from strong demand in key end markets with excellent operational execution and skillful management of supply chain dynamics. It is likely to witness healthy top-line growth owing to secular tailwinds in healthcare, automotive, industrial, 5G and cloud businesses. Jabil’s focus on end-market and product diversification is a key catalyst. Its Photonics business unit and EFFECT Photonics have joined forces to develop next-generation coherent optical modules, which will likely drive top-line expansion.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for JBL’s fiscal 2023 earnings has remained steady at $8.37 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 8.78%.

AAR Corp. provides various products and services to the aviation and defense industries worldwide. The company continues to witness strong performance in its parts supply and program activities. Recovery of demand in the commercial and leisure travel market should continue to contribute to its operating results. The latest agreement with Collins Aerospace may allow it to gain from growth opportunities in the jet market. The stock holds a strong solvency position in the near term.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for AIR’s fiscal 2023 earnings has remained steady at $3.03 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 3.17%.

Deutsche Bank is the largest bank in Germany and one of the largest financial institutions in Europe and the world, as measured by total assets. It offers a wide variety of investment, financial and related products and services. The company's expense reduction initiatives driven by lowering headcount and rationalization of real estate holdings will help it achieve a cost/income ratio target of mid-to-low 70% in 2022 and below 62.5% by 2025. Also, deposit growth will strengthen the balance sheet position and improve the funding base, while the sale of non-strategic businesses and assets strengthens capital ratios.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for DB’s 2022 earnings has moved north by 5.1% to $1.86 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 40.67%.

Core & Main is a specialized distributor of water, wastewater, storm drainage and fire protection products, and related services, to municipalities, private water companies and professional contractors across municipal, non-residential and residential end-markets nationwide. The company currently operates in 300 locations and provides its customers local expertise backed by a national supply chain.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for CNM’s 2022 earnings has remained steady at $2.15 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 47.75%.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.

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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Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report

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Core & Main, Inc. (CNM) : Free Stock Analysis Report

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