I’m no momentum trader. The idea of buying a stock while it’s climbing really goes against my bargain-hunting nature.
That said, there’s definitely value in looking into high-flying stocks. Why? Because price aside, it’s far better to buy companies with improving fundamentals than those with deteriorating fundamentals — as is often the case with “deep-value” plays.
With that in mind, here are three stocks that have recently hit new 52-week highs.
Shares of pulp and paper company Domtar (TSX:UFS)(NYSE:UFS) are continuing their strong 2018, hitting a 52-week high of $70.92 on Monday. Despite some sluggishness over the past couple of days, the stock is up about 26% since the start of April.
Just like its peers, Domtar is taking advantage of favourable paper and pulp prices. In Q2, the company posted operating income of $62 million as sales increased 10.7% to $1.4 billion — topping the consensus sales estimate by $20 million. Domtar also generated a solid $177 million in operating cash flow.
Here’s more good news: even at these 52-week highs, Domtar shares boast a cheapish price-to-sales of 0.8 as well as an enticing 3.4% dividend yield. As long as you’re willing to stomach some volatility — the stock has a beta of 2.5 — Domtar might be worth keeping for the long haul.
Husky Energy (TSX:HSE) is also on a roll, hitting a 52-week high of $22.49 on Wednesday. Over the past year, the stock is up more than 40%.
Husky is certainly riding the wave of strengthening oil prices, but management has also done well to reward shareholders. In Q2, Husky’s funds from operations spiked 69% to $1.2 billion, while generating whopping free cash flow of $500 million. On the strength of that cash flow, management boosted its quarterly dividend from $0.075 to $0.125.
With the shares trading at a forward P/E in the low teens and sporting a forward yield of 2.4%, Husky might have decent room left to run. Of course, the stock is leveraged to volatile energy prices, so don’t expect the ride to be a smooth one.
Nutrien (TSX:NTR)(NYSE:NTR) rounds out our list of momentum plays, with its stock hitting a 52-week high of $76.17 on Wednesday. Shares of the fertilizer giant are now up a solid 35% from their February lows.
Nutrien — formed when Potash Corp and Agrium merged early this year — is benefiting from higher prices for both potash and nitrogen fertilizers. In Q2, the company posted EPS of $1.48, topping the consensus by $0.08. Meanwhile, revenue increased 11.6% to $8.2 billion, $500 million better than analyst estimates. Management also upped its full-year EPS guidance from $2.20-2.60 to $2.40-2.70.
Unfortunately, with a P/E of 40, Nutrien shares aren’t exactly cheap. But with a dividend yield of 2.9%, they can at least provide a decent income cushion in the case of a pullback.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Nutrien is a recommendation of Stock Advisor Canada.