3 hot buys at their 52-week highs
Everything's relative. Whether buying low or selling high -- it's all about good timing.
By Robert Weinstein
After receiving your share of painful misses trying to catch falling knives, you may be ready to buy strength instead of weakness. Value investing doesn't mean you have to buy stocks in the doghouse waiting to become in favor again, the following stocks are trending higher for one simple reason -- they're in demand.
Stocks making new yearly highs often include an extra dose of volatility. Be sure to use stop losses and move them up as the stock moves higher. You lock in your gains and you can let the market work for you while keeping one eye on the way out.
Background: Nvidia designs, develops and markets a 'top-to-bottom' family of award-winning 3-D graphics processors and graphics processing units. Nvidia trades an average of 8.3 million shares per day with a marketcap of $8.9 billion.
52-Week High: $15.48
Price to Book: 2.10
Nvidia's increasing revenue and earnings have brought the dividend payout ratio down to 25%. Most high-flying tech companies don't pay a dividend, and if they do, it's not much of one. Near 2%, Nvidia's dividend doesn't stand out until you consider the shares are near multi-year highs.
Since my earnings estimation and Nvidia delivering the goods, the shares have increased over 12%.
Of the three main competitors in the space, Nvidia and Qualcomm (QCOM) currently stand out the most because they are both near 52-week highs. It's a mistake to count Intel (INTC) out, though, and all three are buys here. I like Advanced Micro Devices (AMD), but given the choice of Intel, Nvidia, or Qualcomm as options, there isn't much reason to select AMD.
Flextronics International Ltd. (FLEX)
Background: Flextronics International engages in the provision of design and manufacturing services to original equipment manufacturers worldwide, including a Motorola phone in Texas and trades an average of 6.3 million shares per day with a market cap of $5.8 billion.
52-Week High: $9.70
Price to Book: 2.81
On Tuesday, Flextronics produced a fresh 52-week high, and support is near $8.90, close to the entry price I would wait for. We may or may not see our entry price if the stock doesn't take a breather, but if you want a lower risk entry price, about $9 is where you want to be.
In the last 12 months, the shares have soared higher. The one-year return is 40%, and the average analyst target price for Flextronics International is $9.26. Even with such a strong move higher, investors are positioned to see more.
The real success story with Flextronics investment thesis comes from the earnings climbing faster than the share price. The forward price-to-earnings ratio is a microscopic single-digit eight.
Motorola is shipping 100,000 Moto X phones running on Google's (GOOG) Android platform according to Reuters. Google has a long way to go to catch up to Apple's (AAPL) market share from a hardware perspective, albeit everyone and their mother are getting into hardware right now.
(Microsoft owns and publishes Top Stocks, an MSN Money site.)
Background: NetApp engages in design, manufacture, marketing, and technical support of networked storage solutions. The company supplies enterprise storage and data management software as well as hardware products and services. NetApp trades an average of 5.5 million shares per day with a marketcap of $14.8 billion.
52 Week High:$43.69
Price to Book: 3.7
NetApp isn't the cheapest stock, even in this group with a forward P/E of 13.85, however NetApp is priced for near zero growth. Meanwhile, revenue has about doubled in the last five years.
With this in mind, NetApp's 19% one year price gain is more catch-up than over extension.
The company currently pays an annualized 60 cents per share in dividends for a yield of 1.4%, and only a 10% payout ratio. NetApp's first dividend payment was this year, so we can't exactly say they have a long history of dividend payments, but I like the direction they are traveling in
Look for an entry price of $42.12 as the sweet spot to enter, based on my technical analysis of the daily and weekly charts.
At the time of publication the author had no position in any of the stocks mentioned.
More from TheStreet.com
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The US isn't strong enough not to care about them now. But one day it will be.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.