Tensions between the United States and Iran heightened after the latter retaliated to the early-hour U.S. airstrike at Baghdad airport, which killed Iran’s top general Qasem Soleimani on Jan 3. The retaliatory move on Jan 7 saw Iran firing multiple ballistic missiles at two military camps in Iraq housing American troops.
Naturally, this escalation in tensions between the nations has weighed on stocks. Moreover, in the event of the United States retaliating following Iran’s missile attacks, the broader equity market might be hurt further in the days ahead. Notably, geopolitical tensions are never good for the market as these cripple economic growth.
However, irrespective of market conditions, investors strive to design a winning portfolio of stocks. They, after all, are putting their hard-earned money into stocks. Amid the prevalent confusion, it is almost impossible for individual investors to come up with a winning portfolio of stocks without proper guidance. Therefore, it is in the best interest of investors to seek advice from “experts in the field."
Who are These Experts & Why is their Advice Important?
The concerned experts are brokers. Brokers have a deeper insight into what’s happening in a particular company, along with a better understanding of the overall sector and the industry.
To attain their objective, they go through minute details of the publicly-available financial documents apart from attending company conference calls and other presentations. Since brokers follow the stocks in their coverage in great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Estimate revisions serve as an important pointer regarding the price of a stock.
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 Advice
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 have 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 a winning one.
# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of the top 75 companies that have witnessed net upgrades over the last four 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.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio the better, companies meeting this criterion are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization.
Com/ADR/Canadian= Com: This eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
Founded in 1901 as a retail shoe business, and headquartered in Seattle, Washington,Nordstrom JWN is a leading fashion specialty retailer in the United States. The Zacks Consensus Estimate for current fiscal year earnings has been revised upward to the tune of 3.6% over the past 90 days.The company currently carries a Zacks Rank #2 (Buy).
M/I Homes MHO: This leading builder of single-family homes currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2020 earnings suggests 5.3% year-over-year growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Airlines AAL, headquartered in Fort Worth, TX, operates more than 6,700 daily flights to more than 330 destinations in more than 50 nations from its hubs. This Zacks Rank #3 (Hold) company has an impressive track with respect to earnings, having surpassed the Zacks Consensus Estimate in each of the past four quarters by an average of 2.4%.
Covenant Transportation Group CVTI is a truckload carrier that offers just-in-time and other premium transportation services throughout the United States. The Zacks Consensus Estimate for 2020 earnings has been revised upward to the tune of 4.4% over the past 60 days. The stock carries a Zacks Rank #3, at present.
Chesterbrook, PA-based AmerisourceBergen ABC is one of the world’s largest pharmaceutical services companies, which focuses on providing drug distribution and related services to reduce health care costs and improve patient outcomes. Currently, the estimated earnings per share growth rate (next three to five years) for the company is 7.8%. At present, the stock carries a Zacks Rank #3.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
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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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American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Covenant Transportation Group, Inc. (CVTI) : Free Stock Analysis Report
M/I Homes, Inc. (MHO) : Free Stock Analysis Report
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
AmerisourceBergen Corporation (ABC) : Free Stock Analysis Report
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