5 Stocks Favored by Brokers Amid Current Uncertainty
Even though inflation in the United States has declined sharply, it remains above the Federal Reserve’s 2% target. Due to the hotter-than-expected January inflation reading, consumer sentiment took a beating. The University of Michigan’s consumer sentiment survey displayed a reading of 76.9 in February, down from the January figure of 79.
Fed Chair Jerome Powell's recent statement that he needs to "see a little bit more data" before rate cuts become a reality highlights that interest rates will remain high, at least in the short term. Higher interest rates raise borrowing costs, escalating the chances of an economic slowdown.
However, this uncertain scenario does not mean that investors should shy away from stocks. Broker-favored stocks like General Motors GM,Cardinal Health CAH, Deutsche Bank AG DB, Group 1 Automotive GPI and Centene CNC are worth keeping on one’s radar for healthy returns despite this turbulence.
Why Following Broker Advice Works Wonders?
Brokers have an in-depth understanding of stocks, great knowledge of the industry and a grasp of the broader economy. They scrutinize a company’s fundamentals and place them against the prevalent economic scenario to find out the attractiveness or otherwise of a stock as an investment option.
Only after undertaking thorough research, can brokers arrive at their recommendation (buy, sell or hold) on a stock. Such well-researched information is not available to individual investors. Therefore, they, in the absence of proper guidance, may end up selecting the wrong stocks for their portfolios. This might result in their hard-earned money going down the drain. To avoid such an unfortunate scenario from materializing, it is highly desirable for investors to be guided by broker advice while deciding their course of action on a particular stock.
Formulating a Winning Portfolio
We have designed a screener to arrive at stocks based on improving analyst recommendations and upward earnings estimate revisions over the last four weeks. However, considering only these factors does not make our strategy foolproof, as the top line has not been considered.
Actually, according to many market watchers, a top-line outperformance is more credible for a company than a mere earnings outperformance. To address top-line concerns, we have included the price/sales ratio in our screener, which serves as a strong complementary valuation metric.
Screening Criteria
# (Up- Down Rating)/ Total (4 weeks) = Top #75: This gives the list of the top 75 companies that 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 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 more than 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume must be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are in 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 passed the screen test:
Based in Detroit, MI, General Motors is one of the world’s largest automakers. The company’s massive electric vehicle(EV) push is commendable. The automaker plans to roll out 30 fresh EV models by 2025-end. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved up 17%.
The Zacks Consensus Estimate for General Motors’s 2024 earnings indicates 17.2% growth from the 2023 actual. GM, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of roughly 20%, on average. GM shares have gained 4% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ohio-based Cardinal Health is a nation-wide 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 flaunting a Zacks Rank of 1, has an impressive surprise history, with its earnings surpassing the Zacks Consensus Estimate in each of the last four quarters, the average being 15.6%.
Deutsche Bank, based in Germany, is one of the largest financial institutions in the world, as measured by total assets. DB offers a wide variety of investment, financial and related products and services. Deutsche Bank’s solid deposit balances support its financials.
DB currently carries a Zacks Rank #3 (Hold). The bank surpassed the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark once), the average beat being 18.6%.
Group 1 is one of the leading automotive retailers in the world, with operations primarily located in the United States and the U.K. The company’s acquisitions of dealerships and franchises to expand and optimize its portfolio are fueling growth.
Group 1 presently carries a Zacks Rank #3. The Zacks Consensus Estimate for GPI’s current-quarter earnings per share has been revised 13.7% upward in the past 60 days. GPI pulled off an earnings beat in three of the last four quarters (missing the mark in the other quarter), the average being 4.13%.
Centene witnessed an uptick in revenues on strength in the Medicare and Medicaid businesses. A well-diversified healthcare suite and solid nation-wide presence have fetched multiple contract wins and deal renewals for CNC. This Zacks Rank #3 health insurer follows an inorganic growth route, which, in turn, bolsters its capabilities and provides an opportunity to boost top-line growth.
The Zacks Consensus Estimate for Centene’s 2024 earnings is pegged at $6.75 per share, indicating a 0.3% rise from the year-ago reported figure. CNC’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average beat being 7.07%.
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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Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report
Centene Corporation (CNC) : Free Stock Analysis Report
