Every investor wishes to have a magical portfolio of stocks with a one-way ticket to success. But this is easier said than done. And when the market is as volatile as it is now, things may take a turn for the worse any moment.
No matter how disciplined and systematic investors are, equity market volatility will always manage to get the better of them. While a few lucky ones rake in the moolah, others fall victim to ad hoc strategies.
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 hidden weaknesses in selected stock are 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 are witnessing price increase. Actually, stocks seeing price strength recently 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 that have already won the game and are capable of beating the benchmark that they have set is 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 seven of the 11 stocks that made it through this screen:
Johnson Outdoors Inc. JOUT is a leading global outdoor recreation company that turns ideas into adventure with innovative, top-quality products. The stock surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 602.1%.
Harsco Corporation HSC is a services and engineered products company. The stock surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 24.4%.
Federated National Holding Company FNHC is an insurance holding company, which through its subsidiaries, controls all aspects of the insurance underwriting, distribution and claims processes. The stock surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 23%.
DMC Global Inc. BOOM is a technology company. Its operating sector consists of industrial infrastructure and oilfield products and services. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while matching the same on one occasion. It delivered an average positive earnings surprise of 69%
Turtle Beach Corporation HEAR is an audio technology company. It designs audio products for consumer, commercial and healthcare markets. The stock surpassed the Zacks Consensus Estimate in all the trailing four quarters.
Turning Point Brands, Inc. TPB provides tobacco products. The company's product consists of moist snuff, loose leaf chewing tobacco, cigarette papers, make-your-own cigar wraps and cigar smoking tobacco, cigars and liquid and tobacco vapour. In the last reported quarter, the company delivered a positive earnings surprise of 16.7%.
Town Sports International Holdings, Inc. CLUB owns and operates fitness clubs in the Mid-Atlantic and Northeast regions of the United States. In the last reported quarter, the company delivered a positive earnings surprise of 157.1%.
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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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Turtle Beach Corporation (HEAR) : Free Stock Analysis Report
Federated National Holding Company (FNHC) : Free Stock Analysis Report
Johnson Outdoors Inc. (JOUT) : Free Stock Analysis Report
Town Sports International Holdings, Inc. (CLUB) : Free Stock Analysis Report
DMC Global Inc. (BOOM) : Free Stock Analysis Report
Turning Point Brands, Inc. (TPB) : Free Stock Analysis Report
Harsco Corporation (HSC) : Free Stock Analysis Report
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