7 Stocks Near 52-Week Highs Worth Buying Now

It is hard to tell since when Wall Street's one-time reliable buzzword "buy low and sell high" has given way to the new investment mantra "buy high and sell higher." A sizable section of investors today favor betting on winning stocks, with the belief that they can still surge higher.

However, this is a touch-and-go strategy which 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.

In this screen, we will show you how to take a quick ride on the 52-week high stock bandwagon, and book handsome profits.

Why Bet on 52 Week Highs?

The 52-week high investment strategy is largely based on the presumptive "adjustment and anchoring bias" principle. This principle works on the belief that investors generally use the 52-week high price as a reference point and value stocks against this anchor. The fear of an impending price crash and a notion about these stocks' overvaluation often lead a nervous troop of investors to sell them.

Their psychological bias prevents them from adding positions on such stocks. It might so happen that the stocks have the fundamental strength to climb even higher, but are prevented from reaching that level due to the psychological resistance of investors.

However, a select few notice that the stocks are still undervalued and the under reaction to news unwarranted. They believe news pertaining to robust sales, surging profitability, bullish earnings prospects and strategic acquisitions can contribute to stock price appreciation.

When persistent positive news about such stocks finally gets absorbed by the market, investors adjust their expectations accordingly. Renewed investor interest might easily shatter the 52-week high resistance helping stocks to surge higher. The trick is to get in before investors realize it.

Also, contemporary 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. It is now time to let go of old inhibitions and lay a wager on this newfound financial wisdom to churn in the profits.

Sifting the Correct Parameters

Though a tried and tested investment technique, investing in 52-week-high stocks has its own share of pitfalls, which might prove perilous. Relying on our meaningful screening parameters will prevent you from falling prey to ad hoc strategies that carry more than their fair share of risk.

We will screen for stocks which are close to their 52-week highs, but still have strong prospects relative to their respective industries. In addition, we've made sure these stocks are relatively undervalued compared to their peers, in terms of earnings as well as sales.

With positive momentum in the stock price, blended with strong earnings growth expectations and great value metrics, we believe these stocks will continue their uptrend for quite some time to come.

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 only within 20% of its 52-week high range and is likely to touch the 52-week threshold soon.)

% Change Price – 4 Weeks > 0

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

% Change Price – 12 Weeks > 0

(This metric ensures that the stock has continued its upward price momentum over the past three months as well.)

Price/Sales <= XIndMed

(Lower the ratio, the higher is the benefit for investors as they have to pay a smaller price for the same amount of sales generated by the company.) 

P/E using F(1) Estimate <= XIndMed

(This metric measures the amount that an investor will invest in a company to obtain one dollar of that company's earnings. This metric 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 metric will help in zeroing in on stocks that have growth rates higher than the industry median. This is a meaningful indicator as decent earnings growth always adds to investor optimism.)

Zacks Rank = 1

(No screening is complete without our proven Zacks Rank, which has proved its worth since inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) have always managed to beat adversities and outperform the market.)

Current Price >= 5

This parameter will help in screening stocks which are trading at a minimum price of $5 or higher.

Volume – 20 days (shares) >= 100000

Inclusion of this metric ensures that there is a substantial volume of shares that can be traded easily.

Here are 7 of the 17 stocks that made it through the screen:

Amkor Technology, Inc. (AMKR): Amkor 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. The company has managed to beat earnings every time in the last four quarters and has an average positive earnings surprise of 131.2%.

Louisiana-Pacific Corp. LPX: The company together with its subsidiaries is engaged in manufacturing and selling building products that are used in new home construction, repair and remodeling, outdoor structures, light industrial and commercial construction. Louisiana-Pacifichas registered an impressive average positive earnings surprise of 55% in the last four quarters.

NetGear, Inc. NTGR: The company designs technologically advanced, branded networking products that address the specific needs of small business and home users. NetGear has managed to beat estimates all four times in the trailing four quarters resulting in an average positive earnings surprise of 26.8%.

Power Integrations Inc. POWI: It is engaged in designing, developing, manufacturing and marketing proprietary, high-voltage, analog integrated circuits that are extensively deployed in alternating current to direct current power conversion. The company has an average positive earnings surprise of 20.6%.

Cooper-Standard Holdings Inc.CPS: This operates as a supplier of systems and components for the automotive industry. Its products include sealing and trim, fuel and brake delivery, fluid transfer, thermal and emissions and anti-vibration systems. Cooper-Standard has managed to beat estimates in all four quarters and has an average positive surprise of 51.2%.

Stoneridge Inc. SRI: It is a designer and manufacturer of highly engineered electrical & electronic components, modules and systems for the automotive, medium and heavy-duty truck, and agricultural vehicle markets. With earnings beats in all the four quarters, Stoneridge has an average positive surprise of 21.8%.

AMN Healthcare Services, Inc. AHS: A travel healthcare company, AMN Healthcare Services recruits and places nurses, physicians, and other healthcare professionals in travel or permanent assignments in acute-care facilities, physician practice groups, and other healthcare facilities. It has an average positive earnings surprise of 23.6% in the last four quarters.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.  

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.

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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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