In the game of stocks, winning means reaching a higher price.
However, finding a win-win strategy is easier said than done. When the markets are choppy marked by widespread global growth concerns, it is difficult for even an insightful investor to come up with a foolproof approach.
One could resort to commonly used techniques to find beaten down stocks that have the potential to recover faster than others. However, even such investment choices bear the risk of disappointment. Particularly, one could be stuck in a value trap if the inherent weakness in a selected stock is not identified.
So, wouldn’t it be a safer strategy to look for stocks that are winners currently and have the potential to gain further?
Here’s how to execute it:
One should primarily look for stocks that have witnessed price increases lately. Actually, such stocks have a high chance of carrying the momentum forward.
If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen like the losers. So, looking at stocks, which have already won the game and are capable of beating the benchmark that they have already set sounds rational.
However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters 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.
Here are six of the seven stocks that made it through this screen:
Skechers U.S.A., Inc. SKX designs, develops and markets a diverse range of lifestyle footwear for men, women and children, as well as performance footwear for men and women. Last quarter, the company delivered a positive earnings surprise of 37.2%.
Columbus McKinnon Corp. CMCO is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions that are distributed to industrial and consumer markets worldwide. Last quarter, the company delivered a positive earnings surprise of 13.3%.
Rosetta Stone Inc. RST, based in Arlington, VA, is a leading provider of technology-based language learning solutions consisting of software, online services and audio practice tools, primarily under the Rosetta Stone brand. Last quarter, the company delivered a positive earnings surprise of 68.0%.
Vishay Precision Group, Inc. VPG is a designer, manufacturer and marketer of resistive foil technology products such as resistive sensors, weighing modules, and control systems for a wide variety of applications. Last quarter, the company delivered a positive earnings surprise of 3.9%.
BayCom Corp. BCML provides commercial banking products and services to businesses and individuals. Last quarter, the company delivered a positive earnings surprise of 42.4%.
ConnectOne Bancorp, Inc. CNOB is a community-based, full-service commercial bank holding company. Last quarter, the company delivered a positive earnings surprise of 39.4%.
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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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ConnectOne Bancorp, Inc. (CNOB) : Free Stock Analysis Report
Rosetta Stone (RST) : Free Stock Analysis Report
Vishay Precision Group, Inc. (VPG) : Free Stock Analysis Report
Columbus McKinnon Corporation (CMCO) : Free Stock Analysis Report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Bay Commercial Bank (BCML) : Free Stock Analysis Report
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