4 Appealing Relative Price Strength Plays for Your Portfolio
Wall Street has seen a bull run in 2023 after a highly disappointing 2022. Year to date, the S&P 500 has witnessed an impressive rally, with the index up by around 17%.
However, recent weeks have seen heightened volatility and uncertainty in U.S. stock markets. The looming question revolves around the Federal Reserve's future monetary policies, with the September FOMC meeting taking center stage.
Most analysts expect the Fed to maintain the fed funds rate between 5.25% and 5.5%, its highest level since March 2021. Consequently, Fed Chairman Jerome Powell's post-FOMC statement holds significance.
Given the potential for ongoing volatility, savvy investors looking for equity opportunities should focus on stocks showing signs of relative price strength. Amid this uncertain landscape, identifying promising opportunities is a prudent strategy for navigating the markets.
Relative Price Strength Strategy
Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers, or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Here are the four stocks that made it through the screen:
WestRock Company WRK: It is a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets. Over the past 30 days, this Atlanta, GA-based firm saw the Zacks Consensus Estimate for fiscal 2023 move up 4.9%. WRK has a VGM Score of A.
WestRock Company beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 30.7%, on average. WRK shares have gained 6.2% in a year.
Caterpillar Inc. CAT: Caterpillar, known for its iconic yellow machines, is the largest global construction and mining equipment manufacturer. The 2023 Zacks Consensus Estimate for this Irving, TX-based firm indicates 43.2% year-over-year earnings per share growth.
Caterpillar beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 18.5%, on average. CAT shares have gained 57.8% in a year.
G-III Apparel Group, Ltd. GIII: Based in New York, the company is a leading designer, manufacturer, and distributor of apparel and accessories. Over the past 30 days, G-III Apparel Group saw the Zacks Consensus Estimate for fiscal 2024 move up 11.2%. GIII has a VGM Score of A.
The Zacks Consensus Estimate for G-III Apparel Group’s fiscal 2024 earnings indicates 11.6% year-over-year growth. It has a trailing four-quarter earnings surprise of roughly 526.6%, on average. GIII shares have increased 47.1% in a year.
REV Group, Inc. REVG: REV Group manufactures specialty vehicles, which operate within niche segments like fire and emergency, commercial activities and RVs. The fiscal 2023 Zacks Consensus Estimate for this Brookfield, WI-based firm indicates 22.5% year-over-year earnings per share growth.
REV Group beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 303.6%, on average. REVG shares have gained 22% in a year.
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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.
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Caterpillar Inc. (CAT) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
WestRock Company (WRK) : Free Stock Analysis Report
REV Group, Inc. (REVG) : Free Stock Analysis Report
