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5 Energy Stocks Set to Crush Their 52-Week Highs Soon

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Following a plethora of jumps and drops, the price of crude oil rose an impressive 45% last year. This helped 'Energy' to be crowned as the top performing S&P sector in 2016 with a market-thumping 24% return.

OPEC oil cartel's November deal to cut output - a long awaited step in reducing the glut of crude - primarily fueled the rally. The historic agreement, together with help from non-OPEC producers and slashing investments (in existing and new wells) have seen oil prices more than double from their last February lows to the current $52 a barrel.

The rising tide of oil momentum produced plenty of green arrows and crude stocks were generally very kind to their owners during the past one year. For biggies like Chevron Corp.CVX and Halliburton Co.HAL , this was the main story behind their new 52-week high share prices.

As per common wisdom, one would explicitly exclude these companies - trading at or near their 52-week high - from the shopping list because the hunt for a good stock typically begins with looking for what is cheap.

Should One Still Buy Stocks at 52-Week Highs?

Who would be such an idiot to buy a stock at its peak price? The opportunity lies in buying low, selling high… right? And how can this happen if the scrip is already at its highest price over the past 52 weeks?

As a company's share bumps up, some investors may steer clear, thinking there is not much upside - which is true in certain cases. However, a high-flying share price does not necessarily mean it's not a bargain right now. In fact, if one believes in the companies' futures, price history really doesn't mean much. Smart investors might as well ride the wave of momentum generated by them.

For sensitive markets like 'energy' - that is trending up or down so frequently - investors can leverage the famed "Momentum Anomaly" to ride price appreciation of stocks and make handsome gains.

The Momentum Effect in Stocks

The Momentum Anomaly theory basically states that what has been going up so far might probably continue to do so in the near future as well.

Momentum investors believes in the saying "trend is your friend," implying that stocks that are doing well lately will continue to do so. They make short-term choices of stocks that are scaling up and tend to sell them as soon as they show signs of a downtrend. The basic idea that prevails among momentum investors is that once a trend is recognized, it is more likely to retain that direction rather than move against the flow.

Thus, gambling on momentum stocks might help investors to earn high returns by cashing in on the latest fad and benefiting from it over the short term. Although it is crucial for investors to avoid chasing fads blindly to risk getting trapped, the current market presents plenty of occasions when the best move is to buy high and sell even higher.

Focus on Stocks Near 52-Week Highs

Basically, if a stock is close to its 52-week high, it means that it has robust relative strength compared to others and shares are ready for strong and sustainable upside.

Thus, seeking stocks with share prices that have been on the rise would make a wise choice for investors.

While 'old-school' investors may still be cautious of getting into such stocks because of their high valuation and limited upside, sometimes, a strong price uptrend suggest robust demand for the stock. More often than not, this is backed by either good earnings performance or strong growth metrics or both.

Which Ones to Buy?

The Momentum Style Score is an indication of the time to buy a stock to benefit from rising share prices. The highest score is an A, so getting in on an A and out on a B or C could be a strategy for short term gains. For a more in-depth understanding, check out our Style Score System .

But investors should bear in mind that this is a speculative strategy and not meant for the weak-of-heart.

That said, we pair the Momentum Style Score of A with a Zacks Rank of #1 (Strong Buy) or #2 (Buy), which as you know indicates stocks with high chances of outperforming the market over the next 1-3 months. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

One of the main factors driving the Zacks Rank is estimate revisions, so stocks with high ranks as well as high momentum scores have even greater chances of short-term appreciation.

5 High-Flying Stocks Set to Explode Further

We zero in on five stocks based on the following credentials: a solid Zacks Rank, a Momentum Style Score of 'A' and current price as a percentage of 52-week high-low range over 90 (a value of 100 indicates that the stock is trading at its 52-week high).

These stocks have been trending up over the recent past, presently trading near their 52-week highs and still appear to have plenty of upside left.

Our Choices

Suncor Energy Inc.SU : Suncor Energy, of Calgary, Alberta is Canada's premier integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore crude oil and gas production, petroleum refining, and product marketing.

Zacks Rank: #1

Momentum Score: 'A'

Price as a % of 52 Week High-Low Range: 98.25

SUNCOR ENERGY Price

SUNCOR ENERGY Price | SUNCOR ENERGY Quote

Halliburton Co. : Houston, TX-based Halliburton Company is one of the largest oilfield service providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial, and government sectors.

Zacks Rank: #2

Momentum Score: 'A'

Price as a % of 52 Week High-Low Range: 100

HALLIBURTON CO Price

HALLIBURTON CO Price | HALLIBURTON CO Quote

Kosmos Energy Ltd.KOS : Kosmos Energy is a leading independent oil and gas exploration and production company focusing on frontier and emerging areas along the Atlantic Margin. The Hamilton, Bermuda-based firm boasts of some high-margin assets in Ghana, Mauritania and Senegal.

Zacks Rank: #2

Momentum Score: 'A'

Price as a % of 52 Week High-Low Range: 98.93

KOSMOS ENERGY Price

KOSMOS ENERGY Price | KOSMOS ENERGY Quote

Abraxas Petroleum Corp.AXAS : Founded in 1977, San Antonio, Texas-based Abraxas Petroleum is an independent domestic energy company with assets in Texas, Wyoming, North Dakota, and Montana.

Zacks Rank: #2

Momentum Score: 'A'

Price as a % of 52 Week High-Low Range: 100

ABRAXAS PETE/NV Price

ABRAXAS PETE/NV Price | ABRAXAS PETE/NV Quote

Plains All American Pipeline L.P.PAA : Houston, TX-based Plains All American Pipeline, a master limited partnership, is involved in the transportation, storage, terminalling and marketing of crude oil, natural gas, natural gas liquids and refined products in the U.S. and Canada.

Zacks Rank: #2

Momentum Score: 'A'

Price as a % of 52 Week High-Low Range: 96.12

PLAINS ALL AMER Price

PLAINS ALL AMER Price | PLAINS ALL AMER Quote

Bottom Line

If you are willing to take that risk to earn that extra return for your portfolio, you can sure take a ride with these stock market's high fliers.

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PLAINS ALL AMER (PAA): Free Stock Analysis Report

SUNCOR ENERGY (SU): Free Stock Analysis Report

HALLIBURTON CO (HAL): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

ABRAXAS PETE/NV (AXAS): Free Stock Analysis Report

KOSMOS ENERGY (KOS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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