With the recent reporting season behind us, the number of shares hitting new 52-week lows each week has slowed to a trickle. Previous winners continue to soar, and a number of companies making acquisitions have been bought into heavily in recent weeks, perhaps suggesting that earnings growth is increasingly prized by investors.
Here's this week's 52-week highs and my take on whether they're still a buy today:
Amcor Limited (ASX: AMC) – last traded at $15.31, up 6% in the past 12 months
Amcor shares surged earlier this week after the company announced a US$400 million acquisition of a South American packaging business, with operations in Chile, Peru, Colombia, and Argentina. The deal is expected to deliver a modest uplift in profit as well as increase Amcor's exposure to emerging economies. Equally importantly, the acquired company is expected to reach annual returns on cash invested of 20% in the next five years, playing an important role in maintaining earnings for shareholders.
Like Brambles Limited (ASX: BXB), Amcor is focussing on lifting its return on invested capital to ensure earnings remain attractive. While I do not think the business is a bargain today, it is a solid defensive share for patient investors, and will likely go on to justify today's price.
Fortescue Metals Group Limited (ASX: FMG) – last traded at $3.62, up 94% in the past 12 months
Fortescue shares have soared as a result of rising iron ore prices in recent months, which are apparently a result of increased infrastructure investment announced by the Chinese government. The heavily indebted company has more than doubled from lows of $1.44, as rising ore prices vastly decreased the risk of the company defaulting on its debt. However, at today's prices, Fortescue looks fully valued and I would consider selling my shares, if I had some.
Investors must consider the outlook for steel/iron ore production and evaluate the likelihood of prices heading significantly higher from here. Although iron ore prices recorded another big jump overnight, I am quite bearish on Fortescue shares over the next 12 months or so. As a result of Fortescue's leverage, investors should expect it to fall more heavily than Rio Tinto Limited (ASX: RIO) or BHP Billiton Limited (ASX: BHP) if prices reverse.
