The recent spike in coronavirus cases in some parts of the United States following reopening of the economy has made investors nervy once again. Notably, on Jun 26, the country recorded the highest single-day increase in coronavirus cases since its outbreak in mid-April. The nation recorded 45,255 new cases, surpassing the 39,972 mark just the day before. The previous maximum number of new cases on a daily basis was recorded as 36,291 on Apr 24.
The surge in new cases put a damper on the astonishing market rally post the re-opening. Such wild swings in the market are enough to send even the steadiest investors into a tizzy.
Expert Advice: A Boon in Bleak Scenario
It is a well-known fact that investors, irrespective of the surrounding conditions, strive to design a winning portfolio of stocks. They, after all, are putting their hard-earned money on stocks. However, against the above backdrop, the task of building a portfolio of stocks for handsome returns is daunting.
One of the tried and tested strategies is to maintain a well-diversified portfolio (i.e. including stocks from different industries) so that one rakes in solid moolah at all times. However, it is easier said than done. With multiple stocks flooding the market at any point of time, it is next to impossible to design one’s portfolio with appropriate stocks in absence of guidance from people equipped with proper knowhow about the market.
Additionally, with time being precious these days, it is difficult for investors to go through an extensive process of stock picking. Given this scenario, it is in their best interest to seek guidance from “experts in the field."
Who Are the Experts & Why?
The “experts” in the field of investment are brokers who are armed with sound knowledge on the space. Brokers, irrespective of their types (sell-side, buy-side or independent), possess a lot more profound information on a company and its prospects than an individual investor.
To this end, the investment exponents study all the financial documents available in the public domain in minute detail apart from attending company conference calls and other presentations. Broker opinion should thus act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
Making the Most of Broker Opinions
The above write-up clearly suggests that by following broker actions, one can arrive at a winning portfolio of stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions in earnings estimates over the last four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it has been included. The price/sales ratio takes care of the company’s top line, making the strategy effective.
# (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 four 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 these criteria are in bottom 10% of our universe of more than 7,700 stocks with respect to this ratio).
Price greater than 5 (as a stock trading below $5 will not likely create a significant interest for most investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization).
Com/ADR/Canadian= Com (This takes out the ADR and Canadian stocks).
Here are five of the 10 stocks that made it through the screen:
Diebold Nixdorf DBD is a provider of connected commerce solutions to financial institutions. This currently Zacks Rank #3 (Hold) Ohio-based company provides automatic teller machines, financial and point-of-sale services. The Zacks Consensus Estimate for 2021 earnings has been revised 9.1% upward over the past 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Genesco GCO is a specialty retailer that sells footwear, headwear and accessories in retail stores across the United States and Canada. This currently Zacks #3 Ranked company’s earnings outshined the Zacks Consensus Estimate in three of the last four quarters (missing estimates in one). The average beat is in excess of 100%.
AutoNation AN is one of the largest automotive retailers in the United States. This Zacks presently #3 Ranked company’s earnings outpaced the Zacks Consensus Estimate in each of the last four quarters. The average beat is 15.3%.
Conn's CONN operates as a specialty retailer of durable consumer goods and related services in the United States. This presently Zacks Rank #3 stock’s estimated earnings growth rate for the next five years is 23%, indicating an increase from its industry’s estimated rise of 13.4%.
Builders FirstSource BLDR is a supplier of building materials and manufactured components. Earnings of this company with a Zacks Rank of 3 at present surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 21.7%.
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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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AutoNation, Inc. (AN) : Free Stock Analysis Report
Conns, Inc. (CONN) : Free Stock Analysis Report
Genesco Inc. (GCO) : Free Stock Analysis Report
Diebold Nixdorf, Incorporated (DBD) : Free Stock Analysis Report
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
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