What are we looking for?
U.S.-listed equities that are trending higher amid a volatile market environment.
The S&P 500 is barely positive over the past five trading days, with a gain of approximately 0.62 per cent as of Thursday morning. A lot of uncertainty regarding the state of the economy and interest rates remains. There has been no uptrend in U.S. indexes since reaching highs back in January, 2022. Despite the recent price volatility and choppy trading range of the S&P 500, we continue to favour a bullish momentum strategy in the current market environment. We were curious to find out which stocks continue to trade near 52-week highs on strong price momentum – metrics of interest to traders who adhere to a trend-following strategy.
The screen
We started by screening for U.S. stocks with a market capitalization of at least $10-billion. This will limit our search to the largest and most stable companies in the U.S. equity market.
Next, we filtered for the top-ranked stocks using Trading Central’s Quantamental rating method, which ranks stocks on a scale of one to 10, with 10 being the most bullish and one being the most bearish. TC Quantamental ranking uses a combination of valuation, growth, quality, price momentum and income as key metrics when ranking a company. In our screen, we set a minimum ranking of five out of 10.
A trend-following methodology favours stocks making higher highs and higher lows despite the dismal return of the broad S&P 500 index. We scanned for stocks that are trading within 15 per cent of their 52-week high and have a five-day price performance that is positive in order to help us screen for stocks with upside momentum.
We also added an earnings filter. Much like upward price momentum, we favoured stocks with upward earning momentum as an added safety layer. We screened for stocks indicating a five-year average earnings per share growth rate of 10 per cent or higher.
Finally, in order to add a layer of defence just in case the broad market remains choppy to bearish, we scanned for stocks that pay a dividend that is higher than the average of the S&P 500, which is currently indicating 2.17 per cent, so investors can get paid to ride out the volatility.
We have also included price-to-earnings ratio YTD and one-year return for informational purposes.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
What we found
Topping our list is Canadian oil and gas producer Imperial Oil, which is listed on the New York Stock Exchange as well as the Toronto Stock Exchange. The stock price is within 13.37 per cent of its 52-week high posted in November, despite having the lowest P/E on our list – just 6.1. The stock also has the highest TC Quantamental rating on our list at 7.6 out of 10, which is above average for the sector. U.S. equities with a TC Quantamental rating of 7 or higher produced a 17.5 per cent annualized return using a five-year historical period with monthly rebalancing, compared with 8 per cent for the S&P 500, according to our research. The stock also has the highest five-year average EPS growth rate on our list at an impressive 81.55 per cent.
CRH PLC, a Dublin-based building materials company, has confirmed a new 52-week high this week and is the best-performing stock over the past five days and YTD with returns of 9.10 and 30.2 per cent, respectively. The stock has been trending higher since a breakout to the upside occurred on Jan. 3.
Chevron Corp., another oil and gas producer, has the largest market cap on our list at US$310-billion. The stock is within 15 per cent of its 52-week high despite a low P/E of just 8.9. The stock has the second-best dividend yield on our list at 3.71 per cent.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central with respect to investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.