5 Stocks Poised to Soar on Strong Relative Price Strength
Financial markets worldwide have been surging since drugmakers Pfizer PFE and BioNTech BNTX announced successful data from their COVID-19 vaccine study. The breakthrough, which brightens chances of the drug’s emergency approval before the year-end, send the Dow, the S&P and the Nasdaq to record heights.
The progress of a vaccine notwithstanding, the road to recovery remains long and uncertain amid concerns of soaring new coronavirus infections in many countries and the reimposition of lockdowns. The Fed’s cautious view of the American economy along with the confusion over the second stimulus package, post-election uncertainty and simmering U.S.-China tensions are also weighing on the markets.
Meanwhile, a few stocks have been holding up even as the coronavirus-induced mayhem knocked down businesses and industries. With the market expected to remain volatile over the near to medium term, one of the ways such potential plays could be identified is to look for signs of relative price strength.
The Relative Price Strength Approach
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is important to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio, since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Here are five of the 27 stocks that made it through the screen:
Clean Harbors, Inc. CLH: Clean Harbors operates a large number of hazardous waste incinerators, landfills and treatment, storage and disposal facilities in North America. The 2020 Zacks Consensus Estimate for this Norwell, MA-based company indicates 11.1% earnings per share growth over 2019. Clean Harbors has a VGM Score of B.
Harley-Davidson, Inc. HOG: A leading producer of premier heavyweight motorcycles, Harley-Davidson has a VGM Score of A. Over 30 days, the Milwaukee, WI-based company has seen the Zacks Consensus Estimate for 2020 surge 329.4%.
Newell Brands Inc. NWL: The Atlanta, GA based company is a producer, marketer, and seller of branded consumer and commercial products. The firm has a VGM Score of A and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 53.82%, on average.
Regions Financial Corporation RF: Regions Financial is a holding company, providing retail and commercial banking, trust, securities brokerage, insurance brokerage, mortgage and insurance products and services. Sporting a VGM Score of B, this Birmingham, AL-headquartered company’s expected EPS growth rate for three to five years currently stands at 7%, comparing favorably with the industry's growth rate of 6.3%.
Tapestry, Inc. TPR: Founded in 1941 and headquartered in New York, Tapestry is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. The company has a VGM Score of B and an enviable earnings surprise history, having surpassed estimates in three of the last four quarters, delivering a positive earnings surprise of 38.76%, on average.
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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Regions Financial Corporation (RF) : Free Stock Analysis Report
Pfizer Inc. (PFE) : Free Stock Analysis Report
Newell Brands Inc. (NWL) : Free Stock Analysis Report
HarleyDavidson, Inc. (HOG) : Free Stock Analysis Report
Clean Harbors, Inc. (CLH) : Free Stock Analysis Report
Tapestry, Inc. (TPR) : Free Stock Analysis Report
BioNTech SE Sponsored ADR (BNTX) : Free Stock Analysis Report
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