Where The Buying Ran Strongest: 36 S&P 500 Stocks At 52-Week Highs

A new high is a sign of strength, but a look inside the list reveals wildly different stories about valuation.

JPMorgan Chase (JPM), with a market value of about $991.9 billion, is trading at its strongest price of the last year. It is one of 36 S&P 500 names on Wednesday's 52-week-high list, a group with a notable concentration of financial firms, including 4 names from Diversified Banks and 4 from Asset Management & Custody Banks.

This clustering raises a key question for any disciplined investor: does a new high signal the same thing for every company? The list below shows a wide range of businesses reaching the same price milestone.

The Biggest Names On The List

The table below shows the 10 largest of the 36 names, sorted by market capitalization, with returns over four windows:

But are all these highs built on the same foundation?

Consider the contrast in valuations. JPMorgan Chase (JPM) is hitting its high while trading at 15.1 times trailing earnings, supported by revenue growth of 11.0% over the last twelve months. Bank of America (BAC) is similar, at 13.8 times earnings with 9.7% revenue growth.

Then look at Merck (MRK). Its stock has gained 10.1% over the last month, but it trades at 103.5 times trailing earnings while its revenue grew 4.6%. Palo Alto Networks (PANW) is at an even steeper 367.8 times trailing earnings. These multiples suggest the market is pricing in a very different future than for the large banks on the list.

What is the disciplined way to read these signals?

A 52-week high is a sign of strength, and strong stocks often continue to perform. The list is a useful screen for names the market is rewarding. It is not, however, a verdict on the business itself.

The disciplined move is to treat the new high as a prompt for research, not a simple buy signal. The essential question is whether the company's operating performance justifies its new price. A stock at its peak is, by definition, more expensive than it has been for a year; the work is to determine if it has also earned it.

Before chasing any name on this list, ask what the company itself expects next. Our Guidance Momentum screen surfaces the stocks whose managements just raised their own outlooks, which is the momentum that tends to have staying power.

New Highs Fade. Discipline Compounds

Some of the names on this list will keep setting highs for years, and some are at the top of their run right now. Sorting one from the other, name by name, every day, is the work most investors never keep up with.

That sorting is what the Trefis High Quality (HQ) Portfolio does systematically: about 30 quality businesses screened for the fundamentals that sustain a run, held with rules instead of excitement. It has a track record of outpacing a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. Use the high list for ideas; use the portfolio for the compounding.