5 Stocks With Recent Price Strength for a Stable Portfolio
U.S. stock markets remained rangebound in the past 10 weeks as market participants are concerned about the Fed’s policy prescriptions. In his post-FOMC meeting statement in September, Fed Chairman Jerome Powell warned of one more rate hike of 25 basis points by the end of this year and a higher interest rate regime for a longer-than-expected period.
A high interest rate is detrimental to equities as it raises the discount rate thereby reducing the net present value of stock investment. Tighter monetary control also raised concerns that the economy may fall into a recession in the near future.
Following Powell’s warning, the yield on the benchmark 10-Year U.S. Treasury Note jumped to 4.8% last week, a level last seen just before the financial crisis of 2008. This yield is of immense importance as it reflects market participants’ perception of the country’s economic conditions affecting consumers, corporations and government agencies.
The fear of a recession in the near future, which almost evaporated just two and a half months ago following a steady decline in the inflation rate and reduction of the magnitude and frequency of interest rate hikes by the central bank, has suddenly erupted in the past three weeks.
Despite severe volatility, a handful of stocks have shown price strength. We have selected five stocks likely to gain in the near term on the back of a favorable Zacks Rank. These companies are — Virco Mfg. Corp. VIRC, LSI Industries Inc. LYTS, Consolidated Water Co. Ltd. CWCO, Build-A-Bear Workshop Inc. BBW and Graham Corp. GHM.
Here’s How We Arrived at the Picks
We have primarily targeted stocks that have freshly been on a bull run. Stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously witnessing an uptrend, there must be a solid reason or it would have probably crashed. So, looking at stocks capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create magic. Therefore, other relevant parameters are needed to create a successful investment strategy.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
Screening Parameters:
Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.
Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Just these few criteria narrowed down the search from over 7,700 stocks to seven.
Let’s discuss five out of these seven stocks:
Virco Mfg. designs, produces, and distributes quality furniture for the contract and education markets worldwide. Examples of facilities served by VIRC include public and private schools, colleges and universities, convention centers, federal and state institutions, churches and other businesses.
VIRC also sell to wholesalers, distributors, retailers and catalog retailers. In order to divide the workload into manageable amounts, VIRC has divided the sales force into two groups: Education and Commercial.
The stock price of Virco Mfg. has soared 69.4% in the past four weeks. It has an expected earnings growth rate of 9.8% for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 38.3% over the last 30 days.
LSI Industries is an Image Solutions company, combining integrated design, manufacturing, and technology to supply its own high-quality lighting fixtures and graphics elements for applications in the retail, specialty niche, and commercial markets. LYTS has two segments, Lighting and Display Solutions. LYTS operates in the United States, Canada, Mexico, Australia, and Latin America.
The stock price of LSI Industries has climbed 10.6% in the past four weeks. It has an expected earnings growth rate of 27.3% for the current fiscal year ending June 2024. The Zacks Consensus Estimate for current-year earnings improved 19.1% over the last 60 days.
Consolidated Water currently utilizes the most advanced technology to convert seawater to potable water and meet customer needs. CWCO is expanding operations via acquisitions and organic projects. The acquisition of full ownership of PERC and the return of tourism to the Cayman Islands are expected to drive earnings. CWCO has enough liquidity to address its short-term debt obligations.
The stock price of Consolidated Water has advanced 5.9% in the past four weeks. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last 60 days.
Build-A-Bear Workshop operates as a multi-channel retailer of plush animals and related products. BBW operates through three segments: Direct-to-Consumer, International Franchising, and Commercial. BBW operates its stores under the Build-A-Bear Workshop brand name and sells products through its e-commerce sites.
The stock price of Build-A-Bear Workshop has gained 3.6% in the past four weeks. It has an expected earnings growth rate of 16.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days.
Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters, and various types of heat exchangers. GHM sells products to chemical, petrochemical, petroleum refining, and electric power generating industries, including cogeneration and geothermal plants.
The stock price of Graham has risen 3% in the past four weeks. It has an expected earnings growth rate of more than 100% for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 66.7% over the last 60 days.
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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Build-A-Bear Workshop, Inc. (BBW) : Free Stock Analysis Report
Virco Manufacturing Corporation (VIRC) : Free Stock Analysis Report
Graham Corporation (GHM) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
LSI Industries Inc. (LYTS) : Free Stock Analysis Report
