All three major U.S. indexes climbed on Tuesday morning as Jay Powell and other Fed officials kicked off their two-day FOMC meeting. Wall Street appears to be breathing a sigh of relief on the banking front, sending shares of JPMorgan and Goldman higher, along with First Republic Bank.
Despite the backstops and the help from larger institutions, plenty of fear surrounds the regional and wider banking sector. The Fed is, however, still largely projected to go ahead and raise rates on Wednesday. The CME FedWatch tool currently places an 85% chance of a 0.25% hike vs. just 15% for the Fed to leave rates unchanged. And a 0.50% hike appears to be off the table even though the ECB recently raised its core rate by 50 basis points.
Investors appear to be interpreting a 0.25% hike as the best of both worlds. The hike is small and it signals that Powell and Co. feel the banking sector is sturdy enough to handle higher rates. And even though the market feels volatile, the VIX hasn’t even come close to levels it reached as recently as October.
The banking fears, mixed with bets on an eventual Fed pivot later this year have more investors rotating back into big tech. The flow back into tech has helped the Nasdaq pop off its recent March 10 lows to retake its 50-day and 200-day moving averages. The S&P 500 is now back above its 200-day and approaching its 50-day once again.
Given this relatively bullish backdrop, investors likely want to buy stocks in March and beyond. One way to find strong stocks to buy right now is to search for stocks that have been able to surge in 2023.
Let’s explore a Zacks screen that helps investors find 'Strong Buy' stocks trading near their highs as we race through March…
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 are two of the five stocks that made it through today’s screen…
Par Pacific Holdings, Inc. (PARR)
Par Pacific Holdings, Inc owns and operates energy, infrastructure, and retail businesses, with a core focus on buying and developing businesses in “logistically complex, niche markets.” Par Pacific owns and operates one of the largest energy networks in Hawaii. PARR’s portfolio also includes operations in the Pacific Northwest and the Rockies.
Par Pacific’s refining capacity, related multimodal logistics systems, retail locations, and more help provide diversity. The company is part of the Zacks Oil and Gas - Refining and Marketing that currently sits in the top 19% of over 250 Zacks industries. PARR’s earnings outlook has skyrocketed since its last report, with its FY23 consensus EPS estimate up 23% and FY23 now 42% higher to help it land that Zacks Rank #1 (Strong Buy).
PARR shares have soared 285% in the last three years to blow away its highly-ranked industry’s 170%. This includes a strong 18% run in 2023 vs. the Oil and Gas - Refining and Marketing’s 9% drop. Plus, Par Pacific is still trading at discount to its industry’s 5.5X at 4.2X forward earnings, which also marks an 86% discount to its own year-long highs.
Universal Insurance Holdings (UVE)
Universal Insurance Holdings is a holding company that offers property and casualty insurance and value-added insurance services. Universal Insurance develops, markets, and writes insurance products for consumers predominantly in the personal residential homeowners lines of business. UVE also performs “substantially all other insurance-related services for our primary insurance entities, including risk management, claims management and distribution.”
Universal Insurance sells insurance products through both its appointed independent agents and through its direct online distribution channels in the U.S. across 19 states, with a bulk in Florida. Universal Insurance’s revenue climbed 9% last year and Zacks estimates call for its sales to climb another 9% in 2023 and 8% in FY24. Better yet, UVE is projected to soar from an adjusted loss of -$0.41 to +$1.65 a share and then surge 45% higher in FY24.
UVE’s strong upward earnings revisions help it land a Zacks Rank #1 (Strong Buy) and its Insurance - Property and Casualty space is in the top 29% over 250 Zacks industries. Plus, its 3.4% dividend yield tops its industry’s 0.80% average. And Universal Insurance shares have ripped 75% higher so far this year. Yet, UVE still trades at a 50% discount to its industry at 10.2X forward earnings.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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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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