Wall Street closed a fabulous October after a highly disappointing September. The rally is continuing this month. We are not out of the woods as inflation remains elevated. However, recently released several data have clearly shown that inflation is dwindling albeit at a slow pace.
On Nov 10, the Department of Labor reported that the consumer price index (CPI) in October rose 0.4% month over month and 7.7% year over year. The consensus estimate was for a month-over-month rise of 0.5% and a year-over-year gain of 7.9%
Core CPI (excluding volatile food and energy items) increased 0.3% month over month and 6.3% year over year. The consensus estimate was of a rise of 0.5% month over month and 6.5% year over year.
On Nov 15, the Department of Labor reported that the producer price index (PPI) increased 0.2% in October compared with the consensus estimate of a 0.5% rise. September’s data was revised downward from 0.4% to 0.2%.
Year over year, PPI rose 8% dropping from 8.4% in September. Core PPI increased 0.2% in October compared with the consensus estimate of 0.4%. Year over year, core PPI rose 5.4% in October.
A gradual decline in the inflation rate is likely to strengthen the U.S stock markets ongoing rally. As peak inflation seems behind us, the Fed is likely to relax its tighter monetary control.
A handful of stocks have shown price strength. These stocks are likely to gain in the near term and are backed by a favorable Zacks Rank. Five of them are — Immunocore Holdings plc IMCR, Old Second Bancorp Inc. OSBC, EDAP TMS S.A. EDAP, Barrett Business Services Inc. BBSI and MainStreet Bancshares Inc. MNSB.
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.
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 13.
Let’s discuss five out of these 13 stocks:
Immunocore is a late-stage biotechnology company. IMCR is engaged in the development of a novel class of T cell receptor bispecific immunotherapies designed to treat diseases, including cancer, infectious and autoimmune disease.
The stock price of Immunocore has jumped 26.8% in the past four weeks. IMCR has an expected earnings growth rate of 79% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 29.6% over the last 30 days.
Old Second Bancorp operates as the bank holding company for Old Second National Bank that provides community banking services. OSBC provides demand, NOW, money market, savings, time deposit, individual retirement, and checking accounts, as well as certificate of deposit accounts. Old Second Bancorp also offers commercial loans, lease financing receivables, commercial real estate loans, construction loans, residential real estate loans, and signature loans.
The stock price of OSBC has climbed 21.3% in the past four weeks. Old Second Bancorp has an expected earnings growth rate of 15.4% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.3% over the last 30 days.
EDAP TMS develops, produces, markets and distributes minimally invasive medical devices, primarily for the treatment of urological diseases. EDAP currently produces and markets devices for the treatment of benign prostate hyperplasia and urinary tract stones. EDAP TMS is also developing a third range of products for the minimally invasive destruction of certain types of tumors.
The stock price of EDAP TMS has surged 18.4% in the past four weeks. EDAP has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved more than 100% over the last seven days.
Barrett Business Services provides light industrial, clerical and technical employees to a wide range of businesses through staff leasing, contract staffing, site management and temporary staffing arrangements. BBSI provides employees to a diverse set of customers, including forest products and agriculture-based companies, electronics manufacturers, transportation and shipping enterprises, professional firms and general contractors.
The stock price of Barrett Business Services has advanced 16.5% in the past four weeks. BBSI has an expected earnings growth rate of 31% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4% over the last 30 days.
MainStreet Bancshares operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations.
MNSB offers demand, money market, savings, and sweep accounts, as well as certificates of deposit, business and consumer checking, interest-bearing checking, business account analysis, and other depository services, and cash management, wire transfer, check imaging, remote deposit capture, and courier services.
The stock price of MainStreet Bancshares has appreciated 15.8% in the past four weeks. MNSB has an expected earnings growth rate of 17% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3% over the last 30 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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EDAP TMS S.A. (EDAP) : Free Stock Analysis Report
Old Second Bancorp, Inc. (OSBC) : Free Stock Analysis Report
Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
MainStreet Bank (MNSB) : Free Stock Analysis Report
Immunocore Holdings PLC Sponsored ADR (IMCR) : Free Stock Analysis Report
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