After two years of substantial gains to record highs, exhaustion in the US equity markets is slowly kicking in. Pullbacks in various sectors have come into play amid growing concerns about overstretched valuations. Likewise, the pullbacks have come on bond yields surging to levels not seen in two months, triggering a selloff in growth-oriented stocks.
The 10-year yield touching highs of 4.79% has once again triggered demand for bonds at the expense of stocks, given the yields on offer. Additionally, the surge in bond yields comes on stronger-than-expected jobs reports that cast doubt on further interest rate cuts. The stock market rallied to record highs last year amid expectations that the Fed will embark on an aggressive easing push that involves interest rate cuts.
A spike in inflation levels amid a resilient US job market has once again averted the prospects of the Fed aggressively cutting interest rates. Consequently, the global rise in bond yields around the globe is being driven by expectations of fewer than expected interest rate cuts.
“With the 10-year yield potentially getting to 5%, I think it’s going to be very hard for the equity market to really gain any meaningful traction here until there’s — at minimum — stability in interest rates,” said Adam Turnquist, chief technical strategist at LPL Financial.
The sentiments echo serious concerns about stocks trading at 52-week highs after blockbuster moves last year. Given that valuations at 52-week highs often appear overstretched, there are growing concerns that some of the stocks could be the subject of significant pullbacks. Amid the concerns, Turnquist does not see the prospect of the market edging into bear territory even though the market appears to be in a correction phase.
Analysts at Goldman Sachs are also bullish about the equity market's outlook and believe there is not enough reason to back away from investing. Additionally, the analysts don’t expect 2025 to be a problematic year for equity investments.
“Valuations are not a good timing signal. ... There’s no clear relationship between your starting valuation and the returns one year later,” Brett Nelson, head of tactical asset allocation for the group, said
Goldman Sachs analysts expect the US economy to grow faster than Europe in 2025. A resilient US economy amid high interest rates should fuel stellar financial results characterized by revenue and earnings growth.
“We do think that the earnings advantage that the U.S. has will continue,” said Sharmin Mossavar-Rahmani, chief investment officer for the Goldman unit.
The prospect of the US economy staying clear of recession even with the Fed leaving interest rates at current levels should offer much-needed support to stocks trading at all-time highs. Analysts also expect friendly regulations and deregulation from the upcoming Republican administration to act as a tailwind to fuel further gains in the equity markets.
Our Methodology
To make the list of best 52-week high stocks to buy according to analysts, we scanned various screeners focusing on stocks trading close to their 52-week highs. We then settled on stocks trading close to 52-week highs (0-10% below high), which analysts believe boast of 25% or more upside potential as of January 14, owing to their solid underlying fundamentals. Finally, we ranked the stocks in ascending order based on their upside potential.
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A thought leader in a control room monitoring the digital audio coding of a media application.
Dolby Laboratories, Inc. (NYSE:DLB) is an industrial company that creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services. While the stock was down by about 7% in 2024, it remains one of the best 52-week high stocks to buy, according to analysts.
That's partly due to a solid financial position that affirms underlying growth. Revenue in its fiscal fourth quarter totaled $305 million compared to $291 million a year before. Net income surged to $59 million compared to $9 million a year ago. Dolby Laboratories, Inc. (NYSE:DLB) expects better-than-expected financial results to persist in 2025, owing to strong momentum in its Dolby Atmos and Dolby Vision units.
Dolby Laboratories bolstered its imaging patent portfolio by acquiring GE Licensing, the intellectual property licensing division of General Electric Company (NYSE:GE), for $429 million. This strategic acquisition, funded by Dolby's cash reserves, is expected to enhance its market position by integrating GE's consumer electronics intellectual property into its products. With a positive outlook for growth in the automotive sector and increasing installations globally, Dolby Laboratories, Inc. (NYSE:DLB) continues to see significant engagement and growth from its Dolby Atmos and Dolby Vision technologies.
Overall DLB ranks 12th on our list of the best 52-week high stocks to buy according to analysts. While we acknowledge the potential of DLB as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
