Timely Buys At New Highs

7/24/2017


A favorable chart is never enough for us to recommend a stock. But when a stock with strong fundamental support displays superior relative strength to reach new highs, we take notice.

Three such stocks, all trading near multiyear highs, are reviewed below. All three earn high marks in our Quadrix stock-rating system, helped by strong earnings-estimate and share-price trends. All three have strong operating momentum, earning Quadrix Momentum scores of at least 80.

Still, all three remain attractively valued, with forward price/earnings ratios below industry-group averages. Based on trailing P/E, all three trade at discounts to their own three- and five-year norms.

Applied Materials ($47; AMAT) earns an Overall Quadrix score of 99, with all six of its category scores above 70. Consensus expectations for the July quarter, up sharply over the past 60 days, call for growth of 68% in per-share earnings and 31% for sales. Results are expected around Aug. 17.

After slumping with the tech-sector decline that began June 9, shares of the semiconductor-equipment giant have rebounded within 3% of their 52-week high of $47.86. A decisive breakout above that level would be encouraging. Applied Materials is a Buy and a Long-Term Buy.


Carnival's ($67; CCL) Overall score has remained above 80 for 11 straight months, helped by a Value score that has stayed above 70. While the Value score has dropped to 74 from 84 a year ago, scores for Earnings Estimates and Performance have surged above 80 on a series of strong quarterly reports.

After trading mostly sideways for more than a month, the stock reached a new closing high on July 17. Shares of other cruise-boat operators, including Royal Caribbean Cruises ($113; RCL), have also displayed encouraging share-price action. Healthy vacation-related spending is boosting volumes, and tight industry capacity is helping lift ticket prices. Carnival, expected to post August-quarter results in late September, is a Focus List Buy and a Long-Term Buy. Royal Caribbean is a Buy and a Long-Term Buy.


Among the 295 biotechnology stocks in our Group Studies report, Celgene ($135; CELG) ranks No. 6 on Overall score. It ranks No. 3 on stock-market value, with a market cap above $108 billion. Despite its size, Celgene is still delivering robust growth. Analyst profit targets project growth of more than 20% in per-share earnings on sales growth of more than 15% for both 2017 and 2018.

Celgene, helped by strength in the biotech group, notched a fresh 52-week closing high on July 17. Near-term action will hinge on June-quarter results, due July 27. Per-share earnings are expected to climb 24% on 17% sales growth, but investors will also be keenly interested in any guidance regarding new products. Celgene relies on a single drug, Revlimid for blood cancers, for more than 60% of sales. The company is expected to report results for 17 late-stage trials over the next 18 months. Celgene says it hopes to lift annual revenue to $21 billion by 2020 — nearly double what it reported last year. Celgene is a Focus List Buy and a Long-Term Buy.


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