Irrespective of the market conditions, investors strive to design a portfolio of stocks that will fetch them handsome returns. No one wants to see their hard-earned money go down the drain as a result of wrong investment decisions. However, the task is easier said than done because selecting the right stocks out of a huge number of stocks in the market at any point in time is by no means an easy task. The current uncertain scenario makes the job even tougher.
In the absence of proper guidance, identifying a winning stock is akin to searching for “a needle in a haystack” for an investor. The proper guidance, in this respect, comes from brokers, who are deemed to be experts equipped with vast knowledge and know-how as far as the field of investing is concerned.
Therefore, we believe that broker-loved stocks like The Greenbrier Companies GBX, AMC Entertainment (AMC), The Gap GPS, Avnet AVT and Group 1 Automotive GPI should be on an investor’s radar for healthy returns.
Brokers 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.
To take care of the earnings performance, we have designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
Top-Line Performance is Important Too
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds. Therefore, one must take the top-line performance into consideration as well while formulating a winning strategy. We have included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
# (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.
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 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 in 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 made it through the screen:
The Greenbrier Companies is a leading supplier of transportation equipment and services to the railroad and related industries. GBX’s manufacturing segment produces double-stack intermodal railcars, conventional railcars and marine vessels and performs repair and refurbishment activities for both intermodal and conventional railcars.
GBX is also engaged in complementary leasing and services activities. Greenbrier Europe is an end-to-end freight railcar manufacturing, engineering and repair business with operations in Poland & Romania and serves customers across Europe and the Middle East. We are impressed by the company’s efforts to pay dividends even in the current uncertain scenario. GBX currently carries a Zacks Rank #3 (Hold).
AMC Entertainment operates as a theatrical exhibition company. It owns interests in theaters and screens. The Zacks Consensus Estimate for the current year has increased 17.6% over the past 60 days. AMC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Gap Inc. is being well-served by lower advertising expenses and technology investments resulting from cost-saving actions. The retailer is on track with the execution of its Power Plan 2023.
GPS shares have surged 74.6% over the past six months. The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 60 days. GPS currently carries a Zacks Rank #3.
Avnet is benefiting from robust demand for its products across Asia, Europe, the Middle East and Africa regions. Improvement in the Americas also served as a tailwind. Its continued focus on boosting IoT capabilities is helping it expand in newer markets and win customers. Moreover, cost-saving efforts are aiding profitability.
Avnet, currently carrying a Zacks Rank of 3, has an impressive surprise history, with its earnings surpassing the Zacks Consensus Estimate in each of the last four quarters, the average being 13.8%.
Group 1 Automotive, a Zacks Rank #3 company, is one of the leading automotive retailers in the world, with operations primarily located in the United States and the UK.
GPI has an impressive surprise history, with its earnings surpassing the Zacks Consensus Estimate in each of the last four quarters, the average being 7.3%. GPI shares have gained 7.3% over the past six months.
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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