The following stocks all share one surprising trait that could make them winners in the months to come:
|
Company
|
CAPS Stars
(out of 5)
|
% Below 52-Week High
|
|
America Movil (NYSE: AMX)
|
*****
|
2%
|
|
Coca-Cola (NYSE: KO)
|
****
|
1%
|
|
Intel (Nasdaq: INTC)
|
****
|
1%
|
|
EMC (NYSE: EMC)
|
****
|
2%
|
|
Disney (NYSE: DIS)
|
****
|
3%
|
|
Cisco (Nasdaq: CSCO)
|
****
|
1%
|
|
Silver Wheaton (NYSE: SLW)
|
****
|
2%
|
Data: Motley Fool CAPS.
A 2004 study by Thomas George and Chuan-Yang Hwang found that baskets of stocks near their 52-week highs tend to outperform the market, sometimes for years on end. Between their proximity to their own highs, and their strong ratings from our Motley Fool CAPS community, the stocks above seem tantalizingly close to surefire success.
Not so fast!
Before you get too excited, don't pin all your hopes on the results of George and Hwang's study. An impending 52-week high isn't the only factor determining a stock's success. The companies above sport wildly different profit margins, market caps, and future growth prospects.
When considering an investment in any of these companies, ask yourself which ones have the best growth outlook. Can Disney pack 20% more people into its parks next year, or conquer the box office with a slate of blockbuster movies? Will consumers and companies stoke greater demand for new technology, boosting the fortunes of Intel, Cisco, and EMC? As for Coca-Cola, its global success also hinders its growth, since it'll never be able to double its already massive beverage sales year over year. Over the past (admittedly tough) decade, shares of Coke and Disney have averaged respective annual growth of 3% and 2%, while Intel, EMC, and Cisco, have all sustained losses.
That said, the George-Hwang study can help you find compelling contenders. Any company approaching its 52-week peak must be doing something right. And hitting that high doesn't make a company overvalued. Cisco's P/E does slightly exceed its five-year average, but Coke and Disney both sport recent P/Es below their averages.
No one metric can ever provide a foolproof guarantee of stock success. But an impending 52-week high could give you a great reason to start looking more closely at potentially powerful stocks.
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