Hey there, Fools. I’m back again to highlight three stocks hitting new 52-week highs. As a reminder, I do this because hitting a new high can mean one of two things:
- the stock’s price strength will keep pushing it even higher and higher; or
- the stock is “overbought” and is due for a significant correction.
So, without further ado, let’s get to our list.
Real estate returns
Leading things off is Morguard North American REIT (TSX:MRG.UN), whose shares hit a new 52-week high of $17.49 late last week. Year to date, the residential REIT is up 15% versus a loss of 14% for the S&P/TSX Capped Materials Index.
Morguard continues to fire on all cylinders. In its recent Q3 results, net operating income increased 8.5%. More importantly, basic funds from operations (FFO) — a key metric in the real estate industry — improved 7% to $15.5 million. Due to that operational strength, management upped its annual cash distribution by $0.02 per unit.
Currently, the stock sports a yield of 4%. And with a FFO payout ratio of just 54%, it might be too attractive to pass on.
Drilling down
Next up, we have Pason Systems (TSX:PSI), which spiked more than 15% to a new high of $24.57 on Thursday. Shares of the drilling services specialist are up 20% year to date, while the S&P/TSX Capped Energy Index is down 19% over the same time frame.
The recent pop was fueled by another strong quarter. In Q3, net income more than tripled to $24.4 million as revenue jumped 28% to $82.3 million. Meanwhile, free cash flow clocked in at a healthy $26.9 million. Although management expects drilling activity to be largely flat in 2019, it remains confident in the company’s positioning.
With no debt on the balance sheet to go along with a yield of 3.2%, Pason’s floor looks limited even after the rally.
Royalty riches
Rounding out our list is Labrador Iron Ore Royalty (TSX:LIF), whose shares hit a 52-week high of $31.36 late last week. Over just the past six months, the iron ore royalty company is up an impressive 45% versus a loss of 14% for the S&P/TSX Capped Materials Index.
Don’t bet on Labrador Iron’s operating momentum to slow anytime soon. In its Q3 results last week, royalty revenue increased 11% $44 million. And while total production was down year over year, it was about 240% higher than the second quarter of 2018. Looking ahead, management expects solid production and strong prices for the balance of 2018 and moving into 2018.
Currently, the stock sports a dividend yield of 3.3%. Of course, when you combine the stock’s high volatility — nearly three times the market average — with its recent rapid rise, I’d be especially cautious moving forward.
The Foolish bottom line
There you have it, Fools: three stocks hitting new 52-week highs worth investigating.
As always, these aren’t official recommendations. Just think of them as a starting point for more research. Stocks with price strength can be especially fickle, so extra due diligence is required.
Fool on.
Brian Pacampara owns no position any of the companies mentioned. Pason Systems is a recommendation of Stock Advisor Canada and Dividend Investor Canada.
This Article Was First Published on The Motley Fool