5 High-Flying Stocks Near 52-Week High That Can Scale Higher

A 52-week high generally serves as an indicator for investors as stocks near that level are perceived to be winners.

Notably, investors often wonder if the stock is overpriced considering the high price. While the apprehensions are not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.

In fact, an investor might miss out on top gainers in an attempt to avoid the steep prices of stocks that are near their 52-week high mark.

A stock can maintain the momentum and keep scaling new highs. So, one should take a more informed approach to understand if further upside is left.

Here we discuss a strategy to find the right stocks.

Borrowing 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 a price crash is impending.

In fact, overvaluation is quite 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 mean 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 continuation of their rally for some time.

1 2 3
View single page >> |

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.