Three Stocks at 52-Week Highs That Might Be Worth Buying
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When a stock reaches new 52-week highs some run the other direction in fear that it will sell-off, but others run to the stock in belief that it will rally further. My belief is somewhere in the middle, if the fundamentals indicate value then it’s still worth a buy. Therefore, here are three stocks at new highs that still look attractive.
After Years of Gains this Media Company Has Broken Out!
After more than six years of trading flat, News Corp (NASDAQ: NWSA) has finally broke out over the last year with gains of 47%. The massive media company announced Q4 earnings last week in which it grew sales by 5% compared to last year. Furthermore, its net earnings more than doubled, as various acquisitions, strength in its cable networks division, and stabilizing printing revenue has answered many of the questions surrounding this company.
A lot of people may think that News Corp is expensive now that it has increased in value by almost 50% over the last year, yet it still trades slightly below its sector’s P/E ratio. The stock has a forward P/E ratio of 14.37 and a price/sales under 2.0. Therefore, I’d say that it’s fairly valued. With that being said, I do think there is additional upside thanks to a change in perception among investors. This is a stock that has been kept down for so long that is could rally higher thanks to several fundamental developments ahead.
Disney’s Future Continues to Shine
After an incredible year, there were a lot of people worried about Walt Disney’s (NYSE: DIS) earnings due to a variety of questions regarding its complicated business structure and high expectations. However, Disney, a very large company, continued to grow and is yet to show a slowing of momentum. The company’s ESPN segment continues to run strong, and the company has a slew of new movie releases and growth plans for Pixar, Marvel, and Lucasfilm properties.
While headlines surrounding the company’s channels, networks, and film continue to make headlines, its core theme park business remains strong. Much like News Corp, the stock trades with a fair value compared to its sector. In terms of valuation, the stock is priced very much like News Corp, with a price/sales near 2.0 and a forward P/E ratio of 14. The company has great margins, wonderful cash flow, and a proven business that hedge funds and institutional investors continue to buy with authority.
Cheap Undervalued Energy Stock at New Highs Worth Buying
Marathon Petroleum (NYSE: MPC) might be my favorite on this list for future gains, despite an 85% return over the last year. This is a company that has greatly improved its refining and marketing segments and has plans to spend over $1.5 billion on capital investments. It’s a shareholder friendly company, buying back $2.65 billion of shares in 2013, and is attractively valued as well.
The S&P 500 Energy sector trades with a P/E ratio of about 12.50, Marathon trades with a P/E ratio of just 8.23. In addition, it trades with a price/sales ratio of 0.35. To put this in perspective, ExxonMobil trades with a price/sales that is more than 120% greater than Marathon. Therefore, Marathon is growing, shareholder friendly, and insanely cheap despite gains. I say there is a strong likelihood for future gains.
For some investors, it can be scary to buy a stock at new highs, especially for those who consider themselves to be value investors. However, “value” is not determined by price, but rather fundamentals and growth compared to a company’s valuation. Therefore, take some time to explore these companies, and others at new highs, and you might find that value is present in several such stocks.
BrianNichols owns MPC. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!