Still Researching: 52-Week Highs and Lows

Welcome back, savvy ladies! We’re still learning about research to enhance your ability to pick good stocks for your future. Last week we talked about price targets, whereby analysts predict what the stock’s price will be at the end of a segment of time.

Today we’re going to continue talking about a research piece that also has to do with time: the 52-week high and low of any particular stock you might be investigating.

Here’s the deal: you can discover within any 52-week period the highest price your stock ever reached and the lowest price to which it sank. So, for example, let’s take McDonald’s Corporation (stock symbol MCD). If you go to one of our research Web sites discussed in previous articles, you will see a lot of the information we’re going to talk about. (One of these pieces of research is about “52 Week Range.” Look for it.)

There are two numbers here, one (obviously) being the low price and the other being the high. For MCD, the low price is $31.73 per share, while the high is $45.38. Here’s what this means: at some point during the last 52 weeks (which adjusts and cycles as you move from week to week in the current year, rather than a calendar year of January 1 to December 31), the stock went as low as $31.73. You can look at a chart by clicking on chart mode (more about this in later articles) if this piece of information matters to you, and exactly when that date occurred. You can also see when the stock hit its highest price for the 52-week period.

Now, here’s what you want to do: you want to see where the current stock price of MCD (or your preferred stock) falls within that low to high range. When we look at MCD currently, for example, it is trading around $45.32 (as of the close of the stock market on February 16).

What does that tell us? We see that MCD is pretty close to its 52-week high. Good or bad? Well, different analysts or stock “experts” would have differing opinions on this.

Some would say that you want to buy stocks close to their low point from the previous year — if all the other factors about the stock and company are positive. This falls into the “buy low, sell high” dictate. The theory here is that the stock has fallen to a low, but improvements in the company and the way they do business (whatever that business happens to be) seem to be helping the stock price move upward. So you are able to get in on the upward movement of the stock. This gives you a lot of room for “improvement,” with the hope that the stock can soar back up to its high point again.

The other “opportunity” is to buy at the high end of the 52-week price range. MCD falls into that category; it is only six cents away from its high price right now (until the market opens again tomorrow). This puts the stock into what is called the momentum category, meaning the stock is moving higher and higher and the expectation is that it will continue to do so.

So you “buy high, sell higher.” If all the research you do on a particular stock and company tells you that there are more good times ahead, you can still buy the stock even though it is at its highest point, because you believe (and you’ve checked the target price for the stock too!) that there’s more room to grow.

Let’s say, for example, you check on the target price for MCD: its average target price is $49. This means, according to the analysts and their given average target price (based on the number of analysts, the number of target prices, and dividing to get an average price), there’s about $7 more upward movement for the stock. (Let’s say there are 10 analysts covering MCD. If you took all ten of their target prices, added them together, then divided by 10, you’d come up with a dollar amount that is an average of the 10. That’s how the average target price is calculated.)

Can you see how target price as a research piece ties in with the 52-week range of high and low stock price? As we move along discussing the various things you can use to check up on a given stock, you’re going to see more and more how they tie in together. That’s why there’s not one piece of research that you can use to evaluate a stock but instead you must put all the pieces together to form as intelligent an opinion as you can.

It’s a little like detective work, a little like working a jigsaw puzzle, a little like investigative reporting. And it’s a lot like fun!!

Next week we’ll talk about yet another piece of the puzzle when it comes to doing good research.


Leave us a Message