During an earnings season, market sentiment is largely influenced by corporate results and guidance. Though earnings performance is a good indicator of a stock’s future performance, identifying future growth drivers is not always an easy task.
A company’s better-than-expected earnings may not always translate to a solid price appreciation for its stock due to some reasons that are not easy to identify. So, it is advisable to depend on expert advice. One way to do this is to follow broker recommendations.
Brokers have a better understanding of stocks, deeper industry knowledge and a grasp over the economy at large. They scrutinize the company’s fundamentals and place them against the current economic backdrop to find out how the stock will fare as an investment option.
Brokers go through the company’s publicly available documents, attend conference calls and are in direct communication with the top management. At times, to get more insight into the company’s products and services offered, they even communicate with customers.
After an in-depth research, brokers decide to rate the company’s stock. So, when a broker upgrades a stock, you can easily rely on it.
Still solely depending on analyst recommendations is not the right way to build your investment portfolio. You should also take into consideration certain other factors to ensure solid returns.
Picking the Winning Strategy
We have a screening strategy that will help in your search for potential winners:
Broker Rating Upgrades (four weeks) of 1% or more: The screen selects stocks that have witnessed broker rating upgrades of 1% or more over the last four weeks.
Current Price greater than 5: The stocks must be trading above $5.
Average 20-day Volume greater than 100,000: A large trading volume guarantees that the stock is easily tradable.
Zacks Rank equal to #1 or 2: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have a proven record of success. You can see the complete list of today’s Zacks #1 Rank stocks here.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.
Here are five stocks out of seven that qualified the screening:
Based in Louisville, KY, Humana Inc. HUM operates as a health and well-being company. Its 2019 earnings are expected to rise 21.3%. The stock, carrying a Zacks Rank #2, has witnessed 6.3% upward revision in broker ratings over the past four weeks.
Darden Restaurants, Inc. DRI, headquartered in Orlando, FL, owns and operates full-service restaurants. Its earnings are expected to increase 18.1% in fiscal 2019. The stock, carrying a Zacks Rank #2, has witnessed 4.6% upward revision in broker ratings over the past four weeks.
The Sherwin-Williams Company SHW develops, manufactures, distributes, and sells paints, coatings, and related products. Earnings for this Cleveland, OH-based company are projected to grow 16.5% in 2019. The stock, sporting a Zacks Rank #1, has witnessed 5.3% upward revision in broker ratings over the past four weeks.
United Continental Holdings, Inc. UAL provides air transportation services. Earnings for this Chicago, IL-based company are projected to increase 23.4% for 2019. The stock, carrying a Zacks Rank #2, has witnessed 6.3% upward revision in broker ratings over the past four weeks.
Spirit Airlines, Inc. SAVE, headquartered in Miramar, FL, provides low-fare airline services. Its earnings are expected to increase 42.4% in 2019. The stock, sporting a Zacks Rank #1, has witnessed 7.7% upward revision in broker ratings over the past four weeks.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
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.
Click here to sign up for a free trial to the Research Wizard today.
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
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research