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4 Stocks Trading Near 52-Week High With More Upside Potential

Investors generally consider a 52-week high a good criterion for determining an entry or exit point for a given stock. However, stocks touching new 52-week highs 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 speculation is not absolutely 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 Louisiana-Pacific LPX, Maximus MMS, Tenet Healthcare THC and Amkor Technology AMKR are expected to maintain their 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 technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”

52-Week High: A Good Indicator

Many times, stocks that hit 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.

Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the 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 >= .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 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 out of the 11 stocks that made it through the screen:

Louisiana-Pacific, or LP, stands at the forefront of sustainable construction, manufacturing high-quality engineered wood building materials, structural framing products, and exterior siding for residential, industrial and light commercial applications.

Louisiana-Pacific's growth trajectory is driven by a strategic approach encompassing acquisitions, business combinations, and the divestment of underperforming operations. This strategy, combined with shrewd investments and cost-reduction measures, has yielded significant benefits. LP's focus on its Siding and Oriented Strand Board (OSB) segments has proven particularly lucrative, aligning with the growing demand for eco-friendly engineered wood siding — a trend supported by long-term market dynamics and demographic changes. By continually refining its portfolio and adeptly leveraging emerging opportunities, Louisiana-Pacific has positioned itself for sustained growth in the evolving building materials sector.

The Zacks Consensus Estimate for LPX’s 2024 earnings has remained steady at $5.79 per share in the past 30 days. The company beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 18.61%.

Maximus operates government health and human services programs globally. With more than 39,600 employees across the globe, Maximus has a presence in the United States, Australia, Canada, Saudi Arabia, Singapore and the United Kingdom.

Maximus has pursued an aggressive acquisition strategy to expand its business scope, deepen client relationships and enhance its technical capabilities. These strategic acquisitions complement the company's long-term organic growth initiatives by bringing in new knowledge, skill sets, and business processes. Maximus benefits from robust operational cash flows, which support its growth strategies and financial stability. The company's commitment to consistent dividend payments has bolstered investor confidence and positively impacted its earnings per share. This multifaceted approach, combining strategic acquisitions, organic growth, strong cash generation and shareholder-friendly policies, positions Maximus for sustained growth and value creation in its market sector.

The Zacks Consensus Estimate for MMS’s fiscal 2024 earnings has moved north by 4.1% to $5.79 per share in the past 30 days. The company beat the Zacks Consensus Estimate twice in the trailing four quarters while missing the same twice, the average negative surprise being 2.69%.

Tenet Healthcare is a prominent investor-owned healthcare services company operating general hospitals and related facilities across multiple states, with key offices in California and Florida.

The company's revenue growth is driven by increasing patient admissions and a strategic approach to mergers and acquisitions aimed at inorganic expansion. Tenet is streamlining its operations through targeted divestitures, shedding underperforming assets to focus capital on higher-yield investments. The Ambulatory Care unit is a significant contributor to the company's success, with 2024 net operating revenues projected in the range of $4.2-$4.3 billion. Additionally, Tenet's financial performance is bolstered by contractual rate increases in its Conifer joint venture business. This combination of organic growth, strategic acquisitions, operational optimization and strong performance in key business units positions Tenet Healthcare for continued success in the competitive healthcare services sector.

The Zacks Consensus Estimate for THC’s 2024 earnings has moved north by 8.8% to $8.76 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 56.5%.

Amkor Technology is the world's largest independent provider of semiconductor packaging and test services. Also, the company is one of the leading developers of advanced semiconductor packaging and test technology.

As chips become more complex and demand for advanced packaging solutions increases, Amkor's expertise in this area could drive growth. Amkor has been expanding its capacity in strategic locations like Taiwan and Portugal, positioning itself to meet growing demand. The company works with a wide range of semiconductor companies, reducing its dependence on any single customer. Amkor serves fast-growing sectors like automotive electronics, 5G, Internet of Things and artificial intelligence, which could fuel long-term demand for its services.

The Zacks Consensus Estimate for AMKR’s 2024 earnings has remained steady at $1.78 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 44.29%.

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 Research Wizard trial 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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