5 Stocks Worth Betting on Post Upgrade by Analysts
Irrespective of the surrounding conditions, investors strive to design a portfolio of stocks that will fetch them lucrative returns. As they are shelling out their hard-earned money into the stock market, they will naturally want to include stocks in the portfolios so as to generate handsome returns.
Moreover, with the September-quarter earnings season underway, investors will like to add outperformers to their respective portfolios. However, the task is easier said than done because selecting the right stocks from a universe of stocks flooding the market at any point of time is no mean feat.
In absence of proper guidance, identifying a winning stock is akin to searching ‘a needle in a haystack’ for an investor. Choice of improper stocks can adversely impact his/her returns, thereby ruining the very objective of investing the hard-earned money in the highly unpredictable stock market.
The appropriate guidance in this respect comes from brokers, who are deemed experts, equipped with vast knowledge as far as the field of investing is concerned. They have at their disposal a lot more information on a company and its prospects than an individual investor. Brokers directly communicate with the top management. They also thoroughly study the publicly-available documents and attend conference calls. Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Naturally, their estimate revisions serve as an important pointer regarding the price of a stock.
To take care of the earnings performance, we designed a screen based on improving broker recommendation and upward estimate revisions 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 also been included. The price/sales ratio takes care of the company’s top line, thereby making the strategy foolproof.
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).
We have also added the following screening parameters to ensure that the strategy is a winning one:
Price-to-Sales = Bot%10 (The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio).
Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).
Market value ($ 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 made it through the screen:
C.H. Robinson Worldwide CHRW, currently carrying a Zacks Rank #2 (Buy), operates as an asset-light logistics company. This Minnesota-based freight broker is being aided by the improving freight scenario in the United States. The company has an impressive track record with respect to earnings, which surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 22%.
ArcBest Corporation ARCB provides freight transportation services and solutions. Improving freight conditions in the United States bode well for this presently Zacks Rank #1 (Strong Buy) player. Solid customer demand and higher market rates are supporting growth at ArcBest. The stock has witnessed the Zacks Consensus Estimate for current-quarter earnings being revised 26% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Asbury Automotive Group ABG is one of the largest automotive retailers in the United States. The auto dealer is currently a #2 Ranked player. With the sustained recovery of the economy from the pandemic blues, auto sales are rebounding, underlined by strong new vehicle sales. Evidently, demand for automotive products and services is solid, aiding Asbury in turn. The company has an impressive surprise history with its earnings having surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 24.3%.
CNO Financial Group CNO is a multiline insurer based in Carmel, IN. The company currently carries a Zacks Rank of 2. The company’s efforts to control costs are commendable, which in turn, are supporting its bottom line. Additionally, CNO Financial invested significantly in technology to improve agent productivity as well as its sales and advertising. This is expected to improve the online customer experience. The stock has witnessed the Zacks Consensus Estimate for current-quarter earnings being revised 3.5% upward over the past 60 days.
Chicago-based Century Aluminum Company CENX is engaged in the production of primary aluminum in the United Sates and Iceland. The currently Zacks #2 Ranked company should gain from its actions to reduce costs. Rise in aluminum demand provides an additional upside. It should also benefit from strength in manufacturing. The stock has witnessed the Zacks Consensus Estimate for current-year earnings move north in excess of 100% over the past 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 to day. 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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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
Asbury Automotive Group, Inc. (ABG) : Free Stock Analysis Report
Century Aluminum Company (CENX) : Free Stock Analysis Report
ArcBest Corporation (ARCB) : Free Stock Analysis Report
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