In this article, we will list the 14 best 52-week high stocks to buy according to short sellers.
The U.S. stock market has been on a roll, with major indices clocking double-digit gains even with the U.S. economy showing signs of weakness. The gains have come from investors shrugging off the uncertainty around the U.S. presidential election and monetary policy to continue betting on various counters.
Consequently, the S&P 500 is already up more than 17% for the year, driven by gains in the communication services and financial services sectors. Likewise, technology stocks have also contributed to driving the overall market high as investors continue paying close attention to some of the big plays around artificial intelligence.
READ ALSO: 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers and Top 10 ADR Stocks To Buy According to Hedge Funds.
The tech-heavy NASDAQ index, which gained 18% for the year, comes on growing expectations that the U.S. Federal Reserve has hit the peak of its monetary policy tightening spree. With expectations that the central bank will start cutting interest rates by as much as 50 basis points, according to CNBC, investors’ sentiments around tech stocks have improved significantly for September.
Investors remain optimistic about the stock market outlook heading into year end because of the positive impact of low interest rates. The Fed’s cutting interest rates will result in a significant drop in borrowing costs, which bodes well for capital-intensive businesses looking to access cheap capital.
The central bank aims to achieve a soft landing for the economy. In this situation, inflation must return to the 2% goal without the U.S. economy sliding into a downturn. If the central bank reduces interest rates prematurely, it faces the danger of a severe surge in inflation. Conversely, if it reduces rates too late, it might cause a severe recession.
While interest rate cuts are expected to offer a much-needed boost, disappointing earnings, and lackluster guidance could curtail market gains, especially for the best 52-week high stocks to buy, according to short sellers.
Several companies are under immense pressure after their valuation skyrocketed amid the artificial intelligence frenzy. Consequently, any concerns about slow earnings and revenue growth should send jitters, triggering significant pullbacks.
Adam Turnquist, the head of technical strategy at LPL Financial, mentioned that the S&P 500 typically experiences about three annual declines of at least 5%. On average, it has seen around one 10% decline each year.
“Expressing this data another way, 94% of years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction,” Turnquist said, according to USA Today. “We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient.”
Looking forward to the rest of the year, experts predict that the best 52-week high stocks to buy, according to short sellers, could keep rising, but they caution about the dangers of premium valuations.
At the same time, financial experts believe that although economic expansion will slow down in the next few months, they don’t see a situation that could cause a recession.
Source:Pixabay
Our Methodology
To compile the list of the best 52-week high stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week highs (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order based on their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Best 52-Week High Stocks to Buy Now According to Short Sellers
14. Texas Instruments Incorporated (NASDAQ:TXN)
52 Week Range: $139.48 – $214.41
Current Share Price: $211.09
Short interest rate: 2.04%
Number of Hedge Fund Holders: 50
Texas Instruments Incorporated (NASDAQ:TXN) is a technology company that designs, manufactures, and sells semiconductors to electronic designers and manufacturers. It is one of the best 52-week high stocks to buy, according to short sellers, for any investors eyeing exposure amid the artificial intelligence frenzy. The stock is currently trading close to its 52-week highs as investors react to strong demand for its semiconductor products and a positive outlook that affirms underlying growth.
Texas Instruments Incorporated (NASDAQ:TXN) has set out on a long-term spending plan to increase its investment over a four-year period, expected to reach approximately $5 billion annually. The goal was to allocate funds towards building facilities in the U.S. to produce essential semiconductors used in various industrial and automotive sectors to reduce the expense per chip. The firm has chosen to focus more on the industrial and automotive markets, which made up 75% of its income in 2023 compared to just 40% in 2014.
The company delivered mixed second-quarter results. Revenues decreased 16% yearly to $3.82 billion, mostly due to weakness in the automotive and industrial segments. However, earnings per share of $1.22 were above consensus estimates of $1.16.
Texas Instruments Incorporated (NASDAQ:TXN) exited the quarter with a cash flow of $6.4 billion, affirming the core business’s strength and the product portfolio’s quality. Free cash flow, on the other hand, stood at $1.5 billion. Owing to the strong balance sheet, the company announced a 55 increase in its dividend payout last year, marking the 20th straight year of a dividend hike.
While the company has been facing revenue headwinds in recent quarters, it has affirmed its commitment to returning value to shareholders, as evidenced by the 2.50% dividend yield. Its dividend payout currently stands at about 90%.
At the end of Q2 2024, 50 hedge funds in Insider Monkey’s database owned stakes in Texas Instruments Incorporated (NASDAQ:TXN), up from 49 in the preceding quarter. With more than 4.2 million shares, First Eagle Investment Management was the company’s most significant stakeholder in Q2.
Here is what The London Company said about Texas Instruments Incorporated (NASDAQ:TXN) in its Q2 2024 investor letter:
“Texas Instruments Incorporated (NASDAQ:TXN) – TXN rallied in 2Q despite declining revenue in its latest update. TXN is beginning to see some encouraging signs of destocking nearing an end and some sub segments of the market are experiencing improving demand. TXN continued to spend on capex and should begin to see positive benefits to cash flow next year from the CHIPS Act.”
13. Netflix Inc. (NASDAQ:NFLX)
52 Week Range: $344.73 – $711.33
Current Share Price: $692.42
Short interest rate: 1.72%
Number of Hedge Fund Holders: 103
Netflix Inc (NASDAQ:NFLX) is an entertainment giant that offers streaming services for T.V. series, documentaries, feature films, and games across various genres and languages. The streaming giant has risen to three-year highs due to an aggressive password crackdown and the marketing of an ad-supported subscription plan.
While the company generates a significant chunk of its revenues from subscription plans, its push into the advertising scene has cemented its position as one of the best 52-week high stocks to buy, according to short sellers. Revenues in the second quarter were up 17% to $9.56 billion, as net income increased to $2.1 billion from $1.4 billion a year ago.
A confirmation that the company has secured a 150% year-over-year increase in upfront advertising commitment is one factor poised to diversify Netflix Inc (NASDAQ:NFLX)’s revenue streams. Netflix, which has recently stopped offering its most affordable ad-free plan to encourage more people to watch its ads, has traditionally approached advertising cautiously.
So far, the platform has kept its ad prices high, at $65 per thousand views (CPM) compared to Disney Plus’ $45.11 CPM. Additionally, unlike other services, Netflix Inc (NASDAQ:NFLX) has restricted the number of ads shown on its platform and requires viewers to choose to see them.
To enhance its advertising revenue, Netflix announced it intends to start winding down its ad-free basic plan in the U.S. and France. The streaming company further mentioned that incorporating ads into its services enables it to provide more affordable options for its customers and generates extra income for the business.
Given Netflix Inc (NASDAQ:NFLX)’s massive customer base, advertising is poised to be a key driver of value. The company added 8 million new paying subscribers in the second quarter, taking its global streaming paid memberships to 277.65 million.
As of the end of the second quarter of 2024, 103 hedge funds out of the 912 funds tracked by Insider Monkey had stakes in Netflix Inc (NASDAQ:NFLX). The most notable stake in Netflix Inc (NASDAQ:NFLX) is owned by Ken Fisher’s Fisher Asset Management which owns a $2.94 billion stake in Netflix Inc (NASDAQ:NFLX).
Here is what Polen Focus Growth Strategy said about Netflix, Inc. (NASDAQ:NFLX) in its Q2 2024 investor letter:
“Finally, we trimmed Netflix, Inc. (NASDAQ:NFLX) mostly due to valuation but also as a source of funds to add to the new position in Shopify. As a reminder, we added to our position in August 2022 amid broad concerns about the company’s ability to grow and monetize shared passwords. We expected Netflix to show progress in monetizing shared passwords, leading to robust free cash flow generation. This is now playing out and is appreciated by the market. Hence, given the balance of growth and valuation, we felt it was appropriate to reduce our exposure to a more normal weight.”
12. T-Mobile US, Inc. (NASDAQ:TMUS)
52 Week Range: $132.40 – $205.28
Current Share Price: $200.46
Short interest rate: 1.43%
Number of Hedge Fund Holders: 64
T-Mobile US, Inc. (NASDAQ:TMUS) is a communication services company that offers voice, messaging, and data services. It utilizes its 4G LTE and 5G networks to deliver these services. It also provides wireless devices, including smartphones, wearables, and tablets.
The company has updated its full-year expectations for both customers and cash inflows as it achieves top-tier growth in customer base and cash flow throughout the core business. This included reaching the milestone of 100 million postpaid customers and setting a new record for the highest number of postpaid customers added in the second quarter.
T-Mobile US, Inc. (NASDAQ:TMUS) successfully converted its exceptional customer growth into leading market performance in service revenue and profit margins and achieved its best cash flow results to date, returning $3.0 billion to shareholders in the second quarter.
During the second quarter, its total services revenue grew 4.4% compared to the previous year, reaching $16.43 billion. Its earnings before interest, taxes, depreciation, and amortization (EBITDA) also rose 8.8% from the same quarter last year, amounting to $8.05 billion. Furthermore, the company saw a 31.7% and 33.9% increase in its net profit and earnings per share (EPS) from the previous year, reaching $2.93 billion and $2.49, respectively.
T-Mobile US, Inc. (NASDAQ:TMUS)’s postpaid phone subscriber user base increased by 770,000, surpassing the 642,000 mark that was initially projected. It also reported a growth of 406,000 customers for its 5G broadband service compared to the year before.
The company has set a goal of reaching between 7 million and 8 million wireless broadband users by the end of the year. As of June 30, T-Mobile had already surpassed this target with over 5.4 million wireless broadband subscribers.
T-Mobile US, Inc. (NASDAQ:TMUS) introduced its Partner plus program, designed to lower the price of 5G laptops and 5G Business Internet for companies. Through this initiative, TMUS aims to overcome the financial obstacle to 5G technologies, emphasizing its advanced capabilities and enhanced security features, thereby positioning itself for significant expansion and increased attractiveness in the market.
The company exited the second quarter with $4.4 billion in adjusted free cash flow, representing a 54% year-over-year increase. With the Increase, T Moiled remains well-positioned to support its dividend program that currently yields 1.29%.
In the second quarter of 2024, the number of hedge funds with stakes in T-Mobile US, Inc. (NASDAQ:TMUS) decreased to 64 from 69 in the previous quarter, according to Insider Monkey’s database of 912 hedge funds. Warren Buffett’s Berkshire Hathaway emerged as the largest stakeholder among these hedge funds during this period.
In its Q3 2023 investor letter, ClearBridge Dividend Strategy shared the following insights on T-Mobile US, Inc. (NASDAQ:TMUS):
“During the quarter we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ:TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile’s strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile’s annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns.
This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T’s has grown by about 14%, while Verizon’s by less than 5%.
Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today’s stock price.
We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.”