This article was published in the December issue of Money magazine.
By Paul R. La Monica
Buy low and sell high may be the first rule of investing, but that doesn't mean you should invest only in poorly performing shares while ignoring stocks on a roll.
If this year's market has taught you anything, it's that stocks that go up can keep climbing higher. In fact, history shows investing in the prior year's top-returning groups beats betting on a rebound among last year's worst performers, notes Sam Stovall, chief equity strategist at S&P Capital IQ.
No one is saying to go buy Tesla (TSLA) -- up 350% year to date; price/earnings ratio: 98 -- or Netflix (NFLX) -- up 300%; P/E: 93 -- says Eric Jackson, managing member of the hedge fund Ironfire Capital. Instead, look at shares of companies that are within 10% of their 52-week highs. Then focus on names with strong profit growth, low debt, and reasonable valuations.
I ran this screen and was happy to see that several companies I cited in columns earlier this year made the cut, including FedEx (FDX), GameStop (GME), Qualcomm (QCOM), and Union Pacific (UNP). Here are three new names that have also had stellar runs -- and that still look as though they've got fuel left in the tank:
Seek financial strength...
Corning (GLW) is an old-guard manufacturer thriving in the new tech world because of its Gorilla Glass unit, which sells screens to most major smartphone and tablet makers. Plus, "the company's balance sheet is a fortress," says Irwin Michael, portfolio manager with ABC Funds, which owns the stock. Those strong finances allowed management to recently announce plans to buy out Samsung Display's stake in a key joint venture that makes LCD displays. That acquisition is expected to boost Corning's profits by 20% in 2014 and 2015.
...and sustainable growth
The online travel site Priceline.com (PCLN) has been on a tear amid strong revenue and booking growth. Yet Mitch Rubin, manager of the RiverPark Large Growth Fund, which owns the stock, says investors shouldn't be scared off by the stock's P/E of 21.
The company's annual profit growth rate is as high as its P/E, a sign the stock isn't necessarily overvalued. Plus Morningstar analyst Dan Su says Priceline's outlook remains strong as the firm makes a big push into Europe and Asia, where online booking is less prevalent than in the U.S.
Rubin also likes the private equity firm Blackstone (BX), a leader in two asset classes gaining momentum: commercial real estate and alternative assets such as hedge funds. The firm's third-quarter earnings surged more than 30%, thanks to its real estate portfolio. Blackstone's size -- it is the world's third-biggest player in private equity -- should help the firm keep attracting assets.
"Their asset growth has been strong since their IPO, and it will continue to grow," says Rubin. Yet the stock trades at a P/E of 9, nearly half that of other asset managers.
Tesla shares (TSLA) made a run at record highs early Friday in a burst of optimism following an upgrade by Deutsche Bank.
But the stock struggled to hold the $130 level as the morning wore on, sparking a debate on StockTwits over how much the electric car maker is worth.
The sky's the limit, say the bulls.
$TSLA so the only question is... all time high before of after lunch? MORE
Investors caught a case of the travel bug Thursday after a blowout quarter from TripAdvisor lifted shares of other online travel companies.
Shares of TripAdvisor (TRIP) surged 16% after the company said late Wednesday that earnings and revenue jumped in the second quarter, blowing past analysts' estimates.
Some traders on StockTwits are hoping the trend will continue when Expedia reports quarterly results after the closing bell Thursday.
$EXPE ... I MORE
You know times must be tough when McDonald's says consumers are struggling. But are diners really too stretched for the Dollar Menu, or is there something else going on?
The fast food giant said Monday that global sales and earnings rose in the second quarter, though profits fell short of analysts' expectations.
McDonald's warned that sales will be "relatively flat" in July and that results will be "challenged" in the second half MOREBen Rooney - Jul 22, 2013 2:12 PM ET
After enduring a brutal sell-off this year, gold bugs appear to be making a stand.
Gold prices rose 1% to $1,246.90 an ounce Tuesday after earlier making a run at $1,260.
Of course, gold is still down more than 33% from the all-time highs near $1,900 in September 2011.
But Tuesday's rebound raised hopes on StockTwits that the worst is over for the yellow metal.
$NUGT fighting and winning some ground MORE
Gold prices were hit hard in the global market rout that followed Ben Bernanke's latest press conference.
Gold futures fell 6.4% to settle at $1,285.9 an ounce -- its lowest level since September 2010.
The drop extended an ongoing sell-off in the precious metal as investors prepare for an end of the Federal Reserve's stimulus policies, which Bernanke said could begin later this year and culminate in 2014.
Of course, he also said MOREBen Rooney - Jun 20, 2013 2:53 PM ET
The Dow Jones industrial average has posted gains every Tuesday for the past 20 weeks.
That makes it the longest winning streak for any day of the week since 1900, according to Ryan Detrick, chief technical analyst at Schaeffer's Investment Research. The previous record was 13 (a three-way tie between Monday, Wednesday and Friday).
The bulk of the Dow's (DJIA) gains this year were reached on Tuesdays. Detrick said the index has MOREBen Rooney - Jun 4, 2013 6:55 AM ET
Michael Kors is cashing in on a rebound in the luxury business as the jet-set starts to splurge again.
The high-end retailer reported earnings that blew past expectations early Wednesday as sales of bespoke handbags and flashy watches bounce back.
Shares of Michael Kors (KORS) rose about 3% in afternoon trading, despite a broad-selloff on Wall Street.
While the company offered cautious guidance, investors on StockTwits were still impressed with how strong sales MOREBen Rooney - May 29, 2013 3:28 PM ET
It's been a good week to be in the soda business.
While the debate over whether Pepsi or Coke taste better will probably go on forever, there's no denying the beverage companies have fairly healthy balance sheets.
PepsiCo and Coca-Cola both reported better-than-expected earnings this week, proving to investors that consumers still like their soda (or pop if you're from the Midwest) and snacks.
Shares of PepsiCo (PEP) rallied 5% to a new MORECatherine Tymkiw - Apr 18, 2013 1:15 PM ET
Who doesn't want to be a billionaire? A new app, aptly named iBillionaire, won't turn you into one. But it makes it easier for you to invest like one.
iBillionaire, which launched Wednesday, tracks what Warren Buffett, Carl Icahn, Bill Ackman and other financial titans are buying and selling.
Using SEC filings, the data are fed automatically into the app, though the iBillionaire team has a data analyst on staff MORECatherine Tymkiw - Apr 10, 2013 11:23 AM ET
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