5 Broker-Loved Stocks to Watch Amid the Current Volatility
Market volatility in the United States, which has been prevalent since the beginning of the current month, has kept investors on edge. After a breather in June, the Fed raised the benchmark lending rate by 25 basis points at its July meeting, reminding investors that inflation is still a force to reckon with. In another alarming development for the U.S. banking industry, Moody’s Investors Service recently downgraded 10 small and mid-sized U.S. banks and put six bigger lenders under review for a potential downgrade.
The rating agency stated that factors like elevated funding costs, potential regulatory capital weakness and heightened risks pertaining to commercial real estate loans on subdued office space demand were hurting banks’ profitability.
However, this gloomy scenario does not mean that investors should dodge stocks. In fact, broker-friendly stocks like CVR Energy CVI, Ford Motor Company F, Telephone and Data Systems TDS, Beazer Homes USA BZH and Flex FLEX are worth keeping on one’s radar for healthy returns despite this turbulence.
Brokers, irrespective of their types (sell-side, buy-side or independent), conduct thorough research of the stocks under their coverage. They go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers indulge in extensive research, the question of their actions being arbitrary does not arise.
Therefore, adhering to brokers’ well-researched information is of paramount importance, particularly in uncertain times such as the present scenario. This is because it is next to impossible for individual investors to keep track of the market nuances amid such economic upheavals and design a winning basket of stocks.
To take care of the earnings performance, we have designed a screen based on improving broker recommendations and upward estimate revisions over the last four weeks.
However, designing a strategy based solely on the bottom line is unlikely to lead to a winning approach. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. To address top-line concerns, we have included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
Screening Criteria
# (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 have 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 the 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 eliminates the ADR and Canadian stocks).
Here are five of the 10 stocks that made it through the screen:
CVR Energy is an independent refiner and marketer of high-value transportation fuels. CVI is also a producer of ammonia and urea ammonia nitrate fertilizers. CVI's petroleum business includes a full-coking sour crude refinery in Coffeyville, KS. Its efforts to reward its shareholders underline its strong financial position. The robust Nitrogen Fertilizer unit is supporting growth.
CVR Energy, currently sporting a Zacks Rank #1 (Strong Buy), has outshined the Zacks Consensus Estimate in each of the past four quarters, by an average of 28.75%. The Zacks Consensus Estimate for current-year earnings has improved 27.84% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ford’s vehicle lineup, supported by F-series trucks, Maverick pickup and SUV models, combined with a robust electric vehicle lineup, should drive growth. The company’s investor-friendly attitude is commendable as well.
Ford currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for F’s 2023 earnings has been revised 17.8% upward over the past 60 days.
Telephone and Data Systems is being well-served by factors like cost-saving initiatives, fiber fortification programs, network infrastructure advancement and steady 5G development. The company has been focusing on business services like cloud-based backup services and managed IP connections.
TDS currently carries a Zacks Rank #3 (Hold). The company has witnessed the Zacks Consensus Estimate for 2024 earnings being revised 9.6% upward over the past 60 days.
Beazer Homes USA is headquartered in Atlanta, GA. The homebuilder specializes in the design, construction and sale of single-family and multi-family residences. BZH offers a variety of housing options under the names Beazer Homes, Gatherings and Choice Plans.
The company’s shares have gained 153.3% year to date, outperforming the industry’s 53% growth in the same timeframe. BZH’s earnings topped the consensus mark in the last four quarters, the average being 29.8%. Currently, Beazer Homes sports a Zacks Rank #1.
Flex is benefiting from investments in infrastructure and expanded capacity despite supply-chain and macroeconomic headwinds. This Singapore-based company is being well-served by strength across Agility Solutions and Reliability Solutions segments.
Flex currently carries a Zacks Rank #2. FLEX’s earnings topped the consensus mark in the last four quarters, the average being 12.6%.
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 backtest 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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Ford Motor Company (F) : Free Stock Analysis Report
Telephone and Data Systems, Inc. (TDS) : Free Stock Analysis Report
CVR Energy Inc. (CVI) : Free Stock Analysis Report
Flex Ltd. (FLEX) : Free Stock Analysis Report
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
