By Austin Silverman
In a down market and economy, rising stocks that buck the trend are worth your attention. Stocks that move contrary to the market must overcome investor suspicion as well as a negative trend. Below are five stocks that are at or near their 52-week highs that could be a good addition to your portfolio on a valuation basis. We looked at other stocks near their 52-week highs and found these to be the best bets.
Airgas Inc. (ARG) – With a beta of 1.01, ARG is as volatile as the market. The company currently has a dividend of $1.28, which translates into a yield of 1.80%. With earnings per share of $3.33, ARG has a price-to-earnings ratio of 21.8. This is slightly higher than the industry ratio of 18.7 and the S&P 500 (SPY) ratio of 18.8. Looking at ARG’s competitor Air Products & Chemicals Inc. (APD), ARG has the higher price-to-earnings ratio with APD at 15.20. In addition, the net income of APD is higher at $1.22 billion compared with ARG’s net income of $270.95 million. However, the gross margin of ARG is much higher at 54.41% compared with 27.44% of APD. Even though this stock is at its 52-week high, Jim Cramer has even rated this stock as a buy. One good sign that a company is doing well is when the insiders purchase outstanding shares. Over the last 3 months, insiders have purchased roughly 780,000, or 1.03% of the outstanding shares. Analysts see the stock price continuing to climb with a mean target price of $81.67. Even though the stock is at a high, it looks like this stock could continue to rise.
CVS Caremark Corp. (CVS) – CVS is a rather stable stock. With a beta of 0.83, it is slightly volatile, and less risky, than the market. The stock offers a dividend of $0.50, a yield of 1.30%. The stock’s earning per share of $2.52 gives it a price-to-earnings ratio of 15.5, which is slightly higher than the drug stores industry of 15.5. One of CVS’ biggest competitors is Walgreen Co. (WAG). Although CVS has the higher net income of $3.43 billion compared with WAG’s $2.71 billion, WAG has the lower price-to-earnings ratio of 11.07. Although, the high price-to-earnings ratio should not indicate that CVS isn’t a good stock to purchase. Warren Buffett’s Berkshire Hathaway recently filed its 3rd-quarter 13-F form and CVS was one of the stocks that the company added to its portfolio. Even with the stock trading near its 52-week high of $39.50, this could be a good one to add to any portfolio. Analysts also agree that the stock is one that will continue to rise with a mean target price of $44.21.
Exelon Corp. (EXC) – With a beta of 0.44, EXC is one of the less risky stocks on this list and is half as volatile as the market. As the stock has lower volatility, there will be less dramatic movement in the stock price. Analysts currently have a mean target price of $46.93 for EXC. To add to the safety and stability to the stock, EXC has the highest dividend yield on this list of 4.70%, which is $2.10 annually. The stock has earnings per share of $3.63, which gives the company a price-to-earnings ratio of 12.3. This ratio is slightly lower than the industry at 13.5. In regard to management effectiveness, EXC does a great job with return on equity of 16.80% and a return on investment of 9%.
MasterCard Inc. (MA) – Another stock that is less volatile than the market, MA has a beta of 0.52. The stock also has a dividend yield of 0.20%, or $0.60 annually. The company’s earnings per share of $17.84 gives the stock a price-to-earnings ratio of 20.6. Even with the company’s 52 week high price tag of $373.20, the ratio is still less than the industry at 23.4. When comparing the net income of MA with competitor Visa, Inc. (V), MA is trailing at $2.30 billion compared with $3.65 billion. In addition the price-to-earnings ratio of V is lower at 17.99. Although, V appears to be better in both of these categories, MA announced its financial results for the 3rd quarter. The company reported net income of $717 million, which was an increase of 38.4% or $5.63 per share. Analysts also predict the stock will continue to rise with a mean target price of $400.
Starbucks Corp. (SBUX) – The final stock on this list also has the highest volatility. SBUX currently has a beta of 1.35. However, this does not mean the stock is not one worth owning. The company currently offers a dividend of $0.68, or yield of 1.60%. The company’s earnings per share is $1.62, which translates to a price-to-earnings ratio of 27.0. This is right in line with the industry average of 27.2. The price-to-book ratio of the two is also very similar with SBUX holding a ratio of 7.41 while the industry has a ratio of 7.27. Both of these ratios are almost double the price-to-book ratio of the S&P 500, which is 3.87. However, when looking at SBUX’s most direct competitor, Dunkin’ Brands Group, Inc. (DNKN), SBUX has the better numbers overall. DNKN has a price-to-earnings ratio of 47.37 and net income of $71.16 million compared with the net income of SBUX of $1.25 billion. One area of concern for the company is the rising cost of coffee. To battle the higher prices, the company has raised prices of its drinks in several major markets including southern California, the Midwest, and Hawaii. With a 52-week high of $44.70, analysts predict that the stock will continue to rise with a mean target price of $48.52.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.