5 Stocks That Brokers Favor Despite the Ongoing Uncertainty
Geopolitical tensions led by the sudden outbreak of the Israel-Hamas war have added to the already prevalent uncertain scenario. The rise in oil prices after Saudi Arabia and Russia extended voluntary supply cuts has also been one of the reasons for the turbulent scenario. Despite the headwinds, the solid September jobs report has lifted spirits as far as the U.S. equity markets are concerned. The better-than-expected report has gone a long way in reducing rate hike fears.
Given this topsy-turvy backdrop, investors would look to have stocks favored by brokers in their watchlist. This is because brokers are deemed to be experts in the field of investing. Therefore, investors would like to have stocks like Rev Group REVG, CVR Energy CVI, Cardinal Health CAH, Commercial Vehicle Group CVGI and Archer Daniels Midland Company ADM in their respective portfolios for attractive returns.
Why Broker Advice is Important?
As brokers indulge in extensive research on stocks under their coverage, they have access to detailed information on a company. They attend company conference calls/presentations and scrutinize every piece of document available in the public domain before instructing investors.
Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Naturally, their estimate revisions serve as an important pointer regarding the price of a stock.
Given this extensive know-how, brokers are deemed to be experts in the field of investing, equipped with thorough knowledge and a clear insight into the nitty gritty of the investment world. Paying heed to such well-researched information is, therefore, advisable for investors to avoid the unfortunate scenario of one’s hard-earned money invested in stock markets going down the drain.
Making the Most of Broker Knowledge
The above write-up clearly suggests that by following broker actions, one can arrive at a promising basket of stocks. Keeping this in mind, we have designed a screen to shortlist stocks based on improving analyst recommendations and upward earnings estimate revisions over the last four weeks.
Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it is considered in designing a winning portfolio of stocks. The price/sales ratio takes care of the company’s top line, making the strategy extremely effective.
Screening Criteria
# (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 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.
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:
REV Group manufactures specialty vehicles that operate within niche segments like fire and emergency, commercial activities and RVs. The Zacks Consensus Estimate for this Brookfield, WI-based firm’s fiscal 2023 earnings per share indicates 46.25% year-over-year 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 currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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, has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days.
Ohio-based Cardinal Health is a nationwide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. CAH’s diversified product portfolio bodes well and should drive growth.
Cardinal Health, currently carrying a Zacks Rank of 2, has an impressive surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 16.03%.
Commercial Vehicle supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, the construction market and other specialized transportation markets.
The Zacks Consensus Estimate for CVGI’s 2023 and 2024 earnings implies year-over-year growth of 102% and 12%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 8% and 5.5%, respectively, over the past 90 days. Ohio-based Commercial Vehicle currently carries a Zacks Rank #3.
Archer Daniels' leadership in critical global trends like flexitarian diets, nutrition and sustainable materials has contributed to its momentum. Its focus on investing in assets and technological capabilities to serve customers efficiently is likely to be a significant growth driver. Solid demand, improved productivity and product innovations have been driving growth. This Chicago, IL-based agricultural product company’s has been progressing well on its three strategic pillars — optimize, drive and growth.
The Zacks Consensus Estimate for Archer Daniels’ 2023 earnings has increased 0.8% in the past 30 days to $7.18 per share. The Zacks Consensus Estimate for ADM’s 2023 earnings suggests an increase of 5.4% over the past 90 days. The company currently has 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 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.
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
Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
CVR Energy Inc. (CVI) : Free Stock Analysis Report
Commercial Vehicle Group, Inc. (CVGI) : Free Stock Analysis Report
REV Group, Inc. (REVG) : Free Stock Analysis Report
