The stock market has stagnated a bit to start December following the huge rally that began in late October and carried over throughout most of November. Sideways movement and a slight downturn are welcome to help cool the market after it got a bit overheated.
The big news Tuesday morning was the JOLTS report. Job openings hit their lowest level since March 2021 in October, with the 8.73 million figure coming in solidly below the 9.4 million Wall Street estimate. The lagging economic indicator highlighted the cooling U.S. economy that has more on Wall Street pricing in the start of Fed rate cuts next year.
The yield on the 10-year U.S. Treasury hit 4.17% on Tuesday morning vs. 4.27% last week and 5.0% on October 18. Lower yields could help the market march back up to all-time highs in the coming months. In the meantime, a Santa Claus and FOMO-focused rally might lead to a bullish December for the stock market.
Not all stocks are participating in the recent rally or the 2023 climb. Over 200 S&P 500 stocks are still in the red this year. Therefore, investors who want to stay exposed to stocks might want to look for those who have managed to climb near their highs recently.
Zacks has a screen that helps investors find #1 (Strong Buy) stocks that are trading near their 52-week highs.
Don't Be Afraid of New Highs
Some investors might prefer not to buy stocks at new highs. But if somebody asked you what the best stocks in your portfolio are, it’s likely you would name the stocks moving up the most.
The most basic idea is that the winners in your portfolio are the ones going up. If a stock is underperforming the market or going down, you'll quickly identify it as one of your worst holdings. Therefore, it makes sense that some of these stocks will be reaching new highs along the way.
Many investors are hesitant to buy stocks making new 52-week highs. But there really isn’t any reason to be. Some may worry that they have already missed the mark at that point, or that now it has more room to fall. Still, a stock making a new 52-week high is a ‘good thing,’ just as one falling to a new 52-week low is a ‘bad thing.’
On top of that, would the person who doesn’t want to buy stocks making new highs be upset if a stock they owned broke out to a new 52-week high? Statistics have also shown that stocks making new highs have a tendency of making even higher highs. And aren’t these the stocks we all dream about?
Now obviously, the fundamentals need to be there, and you should try to keep an eye on valuations. But if you were in a stock making new highs and cheering it on, it seems odd to be afraid of one doing the same just because you haven't bought it yet.
Think about this: A stock just made a new-52 week high, which is 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?
• Current Price/52-Week High greater than or equal to .80
• Percent Change in Price over 12 Weeks greater than 0
• Percent Change in Price over 4 Weeks greater than 0
• Zacks Rank equal to 1
• Price/Sales Ratio less than or equal to Industry Median
• P/E (using F1 Estimates) less than or equal to Industry Median
• Projected One Year EPS Growth F(1)/F(0) greater than or equal to Industry Median
• Current Avg. 20-Day Volume greater than Previous Week's Avg. 20-Day Volume
• All of the above parameters are applied to stocks with a Price greater than or equal to $5 and an Average 20-Day Volume of greater than or equal to 100,000 shares.
• Percent Change in Price over 12 Weeks + Percent Change in Price over 4 Weeks equal to Top # 5
Here is one of the four stocks that made it through today’s screen…
Celestica Inc. (CLS)
Celestica’s core business is focused on design, manufacturing, hardware platforms, supply chain solutions, and beyond. The firm operates two reportable segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). Celestica’s ATS unit is made up of its Aerospace and Defense, Industrial, HealthTech, and Capital Equipment-focused businesses, while CCS consists of its Communications and Enterprise (servers and storage) end markets.
Image Source: Zacks Investment Research
Celestica posted 29% revenue growth last year and it is projected to expand its sales by 9% in FY23 and another 8% in 2024 to pull in $8.51 billion. The firm topped our Q3 EPS estimate at the end of October and boosted its bottom line guidance. Celestica’s improved earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now, with its FY24 EPS consensus 10% higher.
The recent positive earnings revisions extend its impressive run of ascending earnings trends. Celestica is projected to post 24% earnings growth this year and 16% higher next year.
Image Source: Zacks Investment Research
Celestica’s Electronics - Manufacturing Services industry is ranked in the top 11% of over 250 Zacks industries right now. CLS shares have climbed 230% in the past three years vs. Tech’s 18% climb to help the stock trade near fresh 52-week highs. Investors don’t have to pay up for CLS either, with the stock trading at a 60% discount to the wider Zacks Tech sector at 9.9X forward 12-month earnings.
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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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