Today I'm going to go over a simple screen with a powerful concept: Buying stocks making new highs.
I know some are reluctant to buy stocks making new 52 weeks highs. If you’re one of them, have you ever asked yourself why?
If a stock is making a new 52-week high, that's a good thing. Especially now. I'm pretty sure that a person who dislikes buying stocks making new 52-weeks highs wouldn't be too upset if the stock he already owned broke out to new 52-week highs.
And why should he? Statistics have shown that stocks making new highs have a tendency of making even higher highs. These are the stocks we all dream about. Get in and it keeps going up.
Of course the fundamentals need to be there. And you should keep a watchful eye on valuations. But if you were in a stock making new highs and cheering it on, it seems silly to be afraid of one doing the same just because you haven't bought it.
One question I like asking myself just to put things into perspective is: if I was in it, would I be excited and would I still want to be in it? If the answer is yes, then I'll look for the best opportunity to get in.
If the answer is no, that I'd want to take profits, then I'll move on.
This topic actually reminds me of a question someone asked me a while ago about a stock I was talking about that was at a new 52-week high. In fact, it was at a new 5 year high.
He said aren't you worried about buying a stocks at a 52-week high? I said of course not. So it just made a new-52 week high. That’s 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?
The screen I'm running today looks for:
- Stock trading within 10% of their 52 week high. The expression is: Current Price/52 Week high greater than or equal to .90
That means these stocks are either at a new 52 week high, or have just hit it and still trading within 10% of it, or are climbing towards their 52 week high and are within striking distance.
- Zacks Rank less than or equal to 2: Only Zacks Strong Buys and Buys.
- Price to Sales less than or equal to 1
A Price to Sales ratio of 1 means you're paying $1 for every $1 of sales a company makes. A P/S ratio of less than 1 means you're paying less than $1 for every $1 of sales a company makes. I have found that by looking at stocks with a P/S ratio of less than or equal to 1 helps me find stocks that are still considered undervalued -– even if they are making new highs.
- Current Avg. 20 Day Volume greater than Previous week's Avg. 20 Day Volume
In short, this helps me find stocks where the volume has increased in the recent week vs. the previous week. If the price is climbing on increased volume, that shows increased demand or buying coming in. And the more buying demand there is for a stock, the more it should climb.
- All of these parameters are applied to stocks greater than or equal $5 with Avg. daily volume of greater than or equal to 100,000.
Here are 5 stocks that made it through this week’s screen:
Do you invest in stocks making new highs? Use the list below as a starting point for your own analysis.
1. Universal Forest Products Inc. (UFPI, Earnings, Analysts, Financials): Distributes, and installs lumber, composite wood, plastic, and other building products for the DIY/retail, site-built construction, manufactured housing, and industrial markets. Market cap at $986.4M, most recent closing price at $49.70.
3. Chatham Lodging Trust (CLDT, Earnings, Analysts, Financials): Operates as an equity real estate investment trust, investing in the real estate markets of the United States. Market cap at $356.59M, most recent closing price at $19.65.
4. Prudential Financial, Inc. (PRU, Earnings, Analysts, Financials): Prudential Financial, Inc., through its subsidiaries, offers various financial products and services in the United States, Asia, Europe, and Latin America. Market cap at $37.37B, most recent closing price at $80.52.
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Universal Forest Products Inc. (UFPI, Chart, Download SEC Filings)
- AGCO Corporation (AGCO, Chart, Download SEC Filings)
- Chatham Lodging Trust (CLDT, Chart, Download SEC Filings)
- Prudential Financial, Inc. (PRU, Chart, Download SEC Filings)
- DST Systems Inc. (DST, Chart, Download SEC Filings)
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 here.
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