While designing their portfolio of stocks, investors are guided by the sole motive of raking in handsome profits. After all, investors put in their hard-earned money into the stock market and no one likes it to go down the drain.
But designing a winning portfolio of stocks is by no means an easy task for individual investors as the stock market is hounded by uncertainties. Moreover, with a plethora of stocks flooding the market at any point of time, the task identifying promising stocks can be daunting in absence of proper guidance.
The requisite expert advice comes from brokers who have a thorough understanding of the stock market. They have deeper insight into what's happening in a particular company as they directly communicate with its management. They also talk directly to customers at times to gauge what they like or dislike about the products and services offered by a certain company.
They also 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, so the question of their actions being arbitrary does not arise. Therefore, it is prudent for investors to pay heed to such well-researched information for designing their basket of stocks.
Since brokers meticulously follow the stocks under their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. The estimate revisions serve as an important pointer regarding the price of a stock.
For example, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings often lead to stock price depreciation.
Given the above backdrop, we designed a screen to shortlist stocks based on better analyst recommendation and northbound revisions to 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 is also included in. The price/sales ratio takes care of the company’s top line, thereby making the strategy foolproof.
# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of 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 for 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 criteria are in 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 takes out the ADR and Canadian stocks.
Here are five of the 10 stocks that passed the screen test:
ArcBest Corporation ARCB provides freight transportation services and solutions. The stock currently sporting a Zacks Rank #1 (Strong Buy) has seen the Zacks Consensus Estimate for 2020 earnings being revised 43.9% upward over the past 60 days.You can see the complete list of today’s Zacks #1 Rank stocks here.
Bunge Ltd. BG operates as an agribusiness and food company worldwide. This currently Zacks #1 Ranked stock has witnessed the Zacks Consensus Estimate for current-year earnings being revised 96.1% upward over the past 60 days.
American Axle & Manufacturing Holdings AXL is a leading supplier of driveline and drivetrain systems, modules and components for the light vehicle market. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for 2021 earnings has moved 5.3% north over the past 7 days.
Cross Country Healthcare CCRN provides talent management and other consultative services for healthcare clients in the United States. The company is currently Zacks #2 Ranked. The Zacks Consensus Estimate for current-year earnings has moved north in excess of 100% over the past 60 days.
Beazer Homes USA BZH designs, builds and sells single family homes. The company currently flaunts a Zacks Rank of 1. The Zacks Consensus Estimate for current-year earnings has climbed almost 52% over the past 60 days.
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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 Axle & Manufacturing Holdings, Inc. (AXL) : Free Stock Analysis Report
Cross Country Healthcare, Inc. (CCRN) : Free Stock Analysis Report
Bunge Limited (BG) : Free Stock Analysis Report
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
ArcBest Corporation (ARCB) : Free Stock Analysis Report
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