Per recent reports, a fresh wave of the coronavirus is gripping various countries like India, Brazil and many European nations. However, things are looking on the upswing in the United States with increasing number of people getting vaccinated by the day.
The reduction in the number of cases and the rising pace of vaccinations are naturally getting reflected in the health of the domestic economy, which is bouncing back with each passing day. The upbeat reading on U.S. consumer sentiment in March highlights the improving state. On Mar 30, the Conference Board reported that Consumer Confidence in March jumped to a one-year high of 109.7 from the downwardly revised 90.4 in February.
Investors who shell out their hard-earned money into the stock market will be more than eager to take advantage of this buoyant scenario. However, with a deluge of stocks flooding the market at any point of time, the task of choosing appropriate stocks to design a winning portfolio is anything but easy, especially without proper guidance.
Broker Advice: The Way Forward
The apt advice in this respect comes from brokers who are deemed experts, equipped with vast knowledge and experience as far the field of investing is concerned.
Brokers not only scrutinize the publicly available financial documents but also attend company conference calls and other presentations. Naturally, it is in the best interest of investors to pay heed to such well-researched information that has the potential to generate maximum returns from their portfolio. The estimate revisions serve as an important pointer regarding the price of a stock.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide an unbiased opinion to investors after a thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
To take care of the earnings performance, we designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
What About Revenues?
While we talked about the bottom line in detail, the top line (revenue portion) cannot be ignored either. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. Therefore, we included in our screen the price/sales ratio that serves as a strong complementary valuation metric.
# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks).
% change in Q (1) est. (4 weeks) = Top #10 (This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter).
We also added the following screening parameters to ensure that the strategy is a winning one:
Price-to-Sales = Bot%10 (The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio).
Price greater than 5(as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days(Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization).
Com/ADR/Canadian= Com (This ADR and Canadian stocks).
Here are five of the 10 stocks that made it through the screen:
ABM Industries Incorporated ABM, based in New York, is a provider of integrated facility solutions in the United States and internationally. The stock, currently carrying a Zacks Rank #2 (Buy), has seen the Zacks Consensus Estimate for current-quarter earnings move 30.5% north over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Core-Mark Holding Company CORE is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America. The company based in Westlake, TX, currently has a Zacks Rank of 3. Its expected earnings growth rate for the current year is 5.3%.
Diamond S Shipping DSSI provides seaborne transportation of crude oil, refined petroleum and other products in the international shipping markets. This Greenwich, CN-based shipping company currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for current-quarter earnings has been revised 4.1% upward over the past 60 days.
Bloomin’ Brands BLMN owns and operates casual, upscale casual and fine-dining restaurants in the United States and internationally. The company is currently Zacks #3 Ranked. Its earnings outshined the Zacks Consensus Estimate in three of the last four quarters (delivering in-line earnings in the remaining one). The average beat is 57.2%.
Big Lots BIG, based in Columbus, OH, along with its fully-owned subsidiaries is a broad-line closeout retailer in the United States. The stock is currently a #3 Ranked player. The company’s bottom line outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 57.3%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Big Lots, Inc. (BIG) : Free Stock Analysis Report
ABM Industries Incorporated (ABM) : Free Stock Analysis Report
CoreMark Holding Company, Inc. (CORE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research