Wall Street regained momentum in November after three consecutive months of negative closing. The three major stock indexes — the Dow, the S&P 500 500 and the Nasdaq Composite — witnessed two successive weeks of positive closing.
The Fed kept the benchmark lending rate unchanged at the existing 5.25-5.5% range in its last two FOMC meetings. Fed Chair Jerome Powell said that the central bank still has a long way to go before reaching the 2% target inflation rate. Yet, he acknowledged that the higher interest rate regime is getting the desired results.
Moreover, as several key economic data are gradually cooling, a large section of market researchers and economists expect the Fed to be already through with this round of the interest rate hike cycle. CME FedWatch has currently assigned a just 14% chance of another round of rate hike.
Consequently, yields on U.S. government bonds stabilize. The yield on the benchmark 10-Year U.S. Treasury Note dropped to 4.646% after spiking to more than 5.1% in the last week of October. The yield on the long-term 30-Year U.S. Treasury Note also dropped during this period.
Despite the recent rally, 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 — Limbach Holdings Inc. LMB, Grand Canyon Education Inc. LOPE, Thermon Group Holdings Inc. THR, Barrett Business Services Inc. BBSI and HNI Corp. HNI.
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 six.
Let’s discuss five out of those six stocks:
Limbach Holdings provides building systems solutions in the United States. LMB engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. LMB operates in two segments, namely, General Contractor Relationships and Owner Direct Relationships.
The stock price of Limbach Holdings has jumped 27.3% 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 21.4% over the last 90 days.
Grand Canyon Education provides online education services to colleges and universities in the United States. LOPE provides technology services, academic services and counseling services. In addition to its online programs, LOPE offers programs at its traditional campus in Phoenix, Arizona and onsite at the facilities of employers.
The stock price of Grand Canyon Education has climbed 17.8% in the past four weeks. It has an expected earnings growth rate of 17.1% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.5% over the last 30 days.
Thermon Group is engaged in providing engineered thermal solutions, known as heat tracing, for process industries, including energy, chemical processing and power generation. Products offered by THR include heating cables, tubing bundles and control systems while services offered by THR includes design optimization, engineering, installation and maintenance services.
The stock price of Thermon Group has rallied 15.9% in the past four weeks. It has an expected earnings growth rate of 21.2% for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the last 30 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 among others, forest products and agriculture-based companies, electronics manufacturers, transportation and shipping enterprises, professional firms and general contractors.
The stock price of BBSI has surged 12.9% in the past four weeks. It has an expected earnings growth rate of 8.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the last 30 days.
HNI is a leading global provider and designer of office furniture and the leading manufacturer and marketer of hearth products. HNI sells the broadest and deepest selection of quality office furniture solutions available to meet the needs of every customer through an extensive portfolio of well-known and trusted brands. HNI hearth products are the strongest, most respected brands in the industry and include a full array of gas, electric, wood and biomass-burning fireplaces, inserts, stoves, facings and accessories.
The stock price of HNI has advanced 7% in the past four weeks. It has an expected earnings growth rate of 9.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 15.7% over the latest 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.
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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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