If you’re looking for stocks to buy, a recent stat from Investors Business Daily should provide you with plenty of ammunition.
According to IBD, there were 388 stocks and ETFs at 52-week highs as of March 21 compared to just 73 lows. As I write this, on March 26, there are 49 stocks at 52-week highs trading on the NASDAQ and 153 on the NYSE for a total of 202, down from a few days ago, but still well above the 56 new lows on the two exchanges.
So, while the ratio of stocks hitting 52-week highs to those hitting 52-week lows has fallen from 5.3 to 3.6, the reality is that 2019 is turning out to be much improved from the 2018 edition of the market.
To give you an idea of how improved, consider that not one of the 11 sectors in the S&P 500 is down in 2019 through March 25. Seven of the 11 sectors are sporting double-digit returns with the best performance coming from Technology (up 17.8%) and the worst from Healthcare, which is down 4.7% YTD.
If you want to join the party, here are seven stocks to buy as they hit a 52-week high.
Procter & Gamble (PG)
As I write this March 26, Procter & Gamble (NYSE:PG) has just hit a 52-week high of $103.48. Up 12% year to date and 38% over the past 52 weeks, PG has never traded this high before.
Talk about a comeback. It seems like only yesterday that the company was struggling under the weight of too many underperforming brands.
“Less will be much more,” former CEO Alan Lafley told analysts in August 2014. “The objective is growth and much more reliable generation of cash and profit. We’re going to be much more agile and adaptable.”
Analysts applauded the move to shed more than half its brands, opting to go with those generating more than $1 billion in annual revenue. While it took some time to resonate with investors, the company’s move led to a 14% increase in free cash flow since 2014. Just as important, it’s converting all of its net profits and then some to free cash flow, well above its seven-year average.
Investors who bought this time last year are sitting on a handsome profit.
As I write this, Diageo (NYSE:DEO) has hit a 52-week high of $165.53. Up 16% year to date and 26% over the past 52 weeks, DEO is sitting at an all-time high.
So, what’s happening to move DEO higher?
Well, it seems that consumers are moving from beer to premium spirits, the company’s biggest strength, and that’s delivering revenue and earnings growth.
“We are benefiting from consumer trends where people are drinking better and want better brands and experiences,” CEO Ivan Menezes told CNBC in January. “People are moving to spirits and cocktails in a bigger way from wine and beer, and people are trading up for more premium brands.”
Case in point: Diageo’s sales in China grew by 20% in the second half of 2018 with particular strength in its scotch and baijiu brands. The economy might be slowing in China, but consumers there are still shelling out for quality spirits.
In the first half of 2019, Diageo’s sales increased by 5.8%, its operating margin rose by 170 basis points to 35.2%, and free cash flow jumped by 30.8%.
Business is strong and likely to stay that way for the remainder of 2019 and into 2020.
Starbucks (NASDAQ:SBUX) hit a 52-week high of $73.19 on March 26. It’s up 13% year to date and 31% over the past 52 weeks, SBUX is sitting at an all-time high.
I can’t remember the first time I recommended Starbucks stock for InvestorPlace readers, but I do know that I gave Howard Schultz and SBUX stock the big thumbs up in July 2013.
“It’s coming up with new product ideas like its Refreshers line of cold beverages that use coffee innovation to drive revenues and its food business is still in the early stages of development,” I wrote at the time. “Yet investors have barely noticed. Despite generating some of the best results in the company’s history, its stock has gained just 27% over the past 52 weeks. To me, that spells value.”
SBUX stock is up 98% since July 2013, an excellent return considering it hit the skids last summer, but has recovered nicely.
Last April, I argued that Starbucks would be fine without Howard Schultz holding down an executive position at the company. With China keeping CEO Kevin Johnson very busy — it’s opening a new store there at a blistering pace of one every 15 hours.
Whatever the latest issue is that gets investors in a twist, Starbucks always figures out how to cope. That’s a trait you want in all your investments.
General Mills (GIS)
General Mills (NYSE:GIS) hit a 52-week high of $51.93 on March 26. It’s up 32% year to date and 20% over the past 52 weeks. GIS is sitting well off its all-time high of $72.77, hit in July 2016.
What’s worked at General Mills to get its stock on the move? It’s a combination of things.
First, it helps to hire a CEO who’s not afraid to implement change. Jeff Harmening did just that when he was promoted in March 2017 from COO to chief executive, replacing his boss, Ken Powell, who retired after a decade in the top job
Secondly, it doesn’t hurt to raise prices to offset higher costs, which keeps earnings moving higher until organic sales reignite.
Lastly, and probably most importantly, General Mills’ acquisition of Blue Buffalo in 2018 for $8 billion, sent the company on a completely different trajectory, one that investors have bought hook, line, and sinker.
Many thought General Mills overpaid. I don’t see it that way. Here’s what I said about Blue Buffalo recently.
“I’m generally not a fan of big acquisitions because they typically don’t generate the synergies and savings projected nor do they provide the expected growth, either,” I wrote March 19. “However, in the case of General Mills, it had to do something because its cereal business was imploding, losing almost 3% growth in revenue over five years. Investors were avoiding GIS stock as a result.”
General Mills announced strong Q3 2019 results March 20 beating the consensus estimate on both the top and bottom line. I believe this is only the tip of the iceberg.
Sounding like a bit of broken record, Hershey (NYSE:HSY) hit a 52-week high of $113.40 on March 26. It’s up 6% year to date and 20% over the past 52 weeks. HSY is sitting just three dollars shy of its all-time high of $116.49, hit in May 2016.
Although the stock market is going like gangbusters at the moment, there have been some rumblings recently about a recession taking hold in late 2019. If that were to happen, Hershey’s ideally positioned to ride out the storm.
In January, Citigroup (NYSE:C) equity strategy analyst Tobias Levkovich published a list of 50 companies whose pricing power he felt would allow them to outperform in a slowing economy. Hershey made the cut.
Levkovich didn’t indicate how much investors would be willing to pay for Hershey’s ability to raise prices in good times and bad, but it certainly can’t hurt as a foundation for considering an investment in the Pennsylvania maker of chocolate bars and candy.
Two things I like about Hershey.
One is CEO Michelle Buck.
In 2018, I recommended Buck along with six other female CEOs, whose stocks investors should buy. I continue to recommend Hershey stock because of her leadership. Also, Hershey’s board is 45% women, a very high representation compared to other members of the S&P 500.
The second reason I like Hershey is it’s controlled by the Hershey Trust, ensuring that short-term moves to boost profits at the expense of the Hershey legacy aren’t possible.
You might not like dual-class share structures, but in instances like this, they’re an absolute must.
Church & Dwight (CHD)
Church & Dwight (NYSE:CHD) hit a 52-week high of $69.54 on March 26. It’s up 4% year to date and 46% over the past 52 weeks. CHD is sitting at its all-time high, hit on March 26.
I consider Church & Dwight to be the poor cousin of Procter & Gamble. Its brands aren’t nearly as flashy as P&G’s, most people wouldn’t know who either Church or Dwight was and it’s a much smaller company making it far less attractive to blue-chip investors.
That said, it’s one of my favorite stocks of all time.
“It buys brands with high margins and market shares, doesn’t overpay for them, and then grows them organically through the process mentioned previously, all the while converting free cash flow at a better rate than anyone in the industry,” I wrote in April 2016
The process I speak of is Church & Dwight’s three-point plan: It creates innovative new products and brand extensions, it spends considerable amounts advertising its handful of power brands, and then increases a product’s distribution as extensive geographically and by type of market as it possibly can.
It’s hard work. Very few can do what it does.
That’s why it hasn’t had a down year in over a decade.
Ulta Beauty (ULTA)
Ulta Beauty (NASDAQ:ULTA) hit a 52-week high of $345.63 on March 26. It’s up 40% year to date and 65% over the past 52 weeks. ULTA is sitting at its all-time high, hit on March 26.
If you’re like me and have followed the company’s stock for some years, you’ll remember the specialty retailer’s June 2017 swoon that saw it lose more than a quarter of its value in two months.
In August 2017, I recommended investors buy its shares before and after announcing Q2 2017 results, regardless of the direction of its share price. I made that call because of my confidence in the company’s growth strategy.
Here’s how it played out.
Ulta shares closed trading August 24, 2017, at $233.71 a share.
It announced Q2 2017 revenues and earnings that beat analyst expectations. However, investors didn’t like the slowdown in same-store-sales growth, so its shares dropped by 9.1% on the next day’s trading. It then spent the next 15 months in a trading range between $200-$300.
So, if you bought 100 shares of ULTA stock on August 24, 2017, at the high of $247.30 and 100 shares on August 25, 2017, at the high of $217.80, you’d be up 47% in the 20 months since.
I’m not saying this to toot my own horn. Instead, I’m saying it because I believe that the earnings momentum it continues to enjoy is going to carry on into fiscal 2019 and beyond.
I live in Canada. There isn’t a single Ulta store open here. The last time I looked, Canadians didn’t have a problem shopping at Sephora. I doubt they’d have a problem buying at Ulta.
Between Canada and e-commerce, the pathway to growth is alive and well.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.