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5 Stocks to Watch for Following Recent Broker Upgrade

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·6 min read
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The U.S. market continues to be plagued by a high degree of unpredictability and market volatility. Uncertainty fueled by the ongoing Russia-Ukraine crisis and the 40-year high inflation are keeping investors on tenterhooks.

However, the ongoing turbulence can no way dissuade investors from adding a winning basket of stocks to their respective portfolios for attractive returns. While it is impossible to be absolutely sure of a lucrative stock, guidance by the experts in this unstable world of investing seems a wise approach.

The specialists in the investing world are brokers. Generally, three types of brokers (sell-side, buy-side and independent) are present in the investment world, with sell-side analysts being the most common. They are employed by various brokerage firms to provide an unbiased opinion to investors on the stocks under their coverage after a thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.

All types of brokers indulge in an extensive research of the stocks under their coverage. They have access to much detailed information on a company. To this end, they attend company conference calls/presentations and scrutinize every detail available publicly before advising investors. Naturally, broker advice acts as an invaluable guide for investors in their bid to garner the maximum from their portfolios.

Direction of Earnings Estimates: A Good Pointer

Since brokers follow the stocks in their coverage with great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. The estimate revisions serve as an important pointer regarding the price of a stock.

For example, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and the stock price while formulating their investment strategy.

Making the Most of Broker Aid

The above write-up clearly suggests that by following broker actions, one can arrive at a promising portfolio of stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions in earnings estimates over the last four weeks.

Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it is  counted. The price/sales ratio takes care of the company’s top line, making the strategy effective.

Screening Criteria

# (Up-Down Rating)/ Total (4 weeks) =Top #75:This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks.

% change in Q (1) est. (4 weeks) = Top #10:This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter.

Price-to-Sales = Bot%10:The lower the ratio, the better. Companies meeting this criterion are in the bottom 10% of our universe of over 7,700 stocks.

Price greater than 5:A stock trading below $5 will not likely be of significant interest to most investors.

Average Daily Volume greater than 100,000 shares over the last 20 trading days:Volume has to be significant to ensure that these are easily traded.

Market value ($ mil) = Top #3000:This gives us stocks that are the top 3000 in terms of market capitalization.

Com/ADR/Canadian= Com: This takes out the ADR and Canadian stocks.

Here are five of the 10 stocks that passed the screen:

ArcBest Corporation ARCB currently carries a Zacks Rank #3 (Hold). ARCB’s earnings trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average being 31.4%. The Zacks Consensus Estimate for ARCB’s 2022 earnings has been revised 5.2% upward in the past 60 days.

Improving freight conditions in the United States bode well for ArcBest. Solid customer demand and higher market rates are supporting ARCB.

Archer Daniels ADM: This Chicago, IL-based agricultural products company’s leadership in key global trends like flexitarian diets, nutrition and sustainable materials has been keeping its momentum alive. ADM’s focus on making investments in assets and technological capabilities to serve customers efficiently is likely to be a key driver.

Archer Daniels’ Readiness program, positive cash flow and a solid performance at the Nutrition unit have been aiding results. ADM, currently carrying a Zacks Rank of 3, has been progressing well on its three strategic pillars, which are to optimize, drive and growth. The Zacks Consensus Estimate for its 2022 earnings has been revised 0.8% upward over the past 60 days. Shares of ADM have soared 60.5% over the past year.

ABM Industries’ABM comprehensive transformational initiative called 2020 Vision should help it attain long-term profitable growth through an industry-based go-to-market approach. We are also impressed with ABM’s endeavors to reward its shareholders through dividend payments and share repurchases.

The Zacks Consensus Estimate for ABM Industries’ 2022 earnings has been revised 5.7% upward in the past 60 days. Shares of ABM have increased more than 6% in the past six months. ABM currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Caleres CAL: Caleres, currently carrying a Zacks Rank #3,is a leading footwear retailer and wholesaler in the United States, China, Canada, China and Guam. CAL operates through Famous Footwear and Brand Portfolio segments. This Saint Louis, MO-based player steadily benefits from positive consumer demand trends and an accelerated recovery in the footwear marketplace, which continue to aid its sales. The momentum in the Famous Footwear brand is expected to contribute meaningfully to sales growth.

Caleres has an excellent surprise history with its earnings having surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 772.6%.

Cigna Corporation CI: Cigna’s revenues have been increasing for the past several years, driven by acquisitions, superior operating performance, and high-quality products and services portfolio. Strong revenues, acquisition of Express Scripts, business streamlining, growing medical membership are the main drivers at CI.

The Zacks Consensus Estimate for Cigna’s 2022 earnings has been revised 0.13% upward in the past 60 days. Shares of CI have increased more than 11% on a year-to-date basis.  CI currently carries a Zacks Rank #3.

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.

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.

isclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.


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Archer Daniels Midland Company (ADM) : Free Stock Analysis Report
 
Cigna Corporation (CI) : Free Stock Analysis Report
 
ABM Industries Incorporated (ABM) : Free Stock Analysis Report
 
ArcBest Corporation (ARCB) : Free Stock Analysis Report
 
Caleres, Inc. (CAL) : Free Stock Analysis Report
 
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