Every investor wishes to have a magical portfolio of stocks that goes higher and higher. But it 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 have recently been 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, so 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 eight of the 13 stocks that made it through this screen:
DNB Financial Corporation DNBF is a bank holding company of DNB Financial Corporation that offers various commercial banking products and services for individuals and corporate customers in southeastern Pennsylvania. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 14.86%.
NVE Corporation NVEC is a recognized leader in the practical commercialization of spintronics, which many experts believe represents the next generation of microelectronics. The company surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion in the trailing four quarters. It has an average positive earnings surprise of 14.05%.
Nova Measuring Instruments Ltd. NVMI develops, produces and markets monitoring and measurement systems for the semiconductor manufacturing industry. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 40.58%.
Glaukos Corporation GKOS is an ophthalmic medical technology company. The company develops, manufactures and markets medical devices for the treatment of glaucoma. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 196.23%.
County Bancorp, Inc. ICBK is a bank holding company. It provides a range of consumer and commercial banking services to individuals, businesses, and industries. Last quarter, the company had posted a positive earnings surprise of 4.17%
Apogee Enterprises Inc. APOG is a leader in technologies involving the design and development of value-added glass products and services. The company surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion in the trailing four quarters. It has an average positive earnings surprise of 13.24%.
KB Financial Group Inc. KB, formerly KB Financial Group Inc., is a commercial bank in Korea. On the asset side, the company provides credit and related financial services to individuals and small and medium sized enterprises and, to a lesser extent, to large corporate customers. On the deposit side, it provides a range of deposit products and related services to both individuals and enterprises of all sizes.
Leucadia National Corporation LUK is a diversified financial services holding company principally engaged in personal and commercial lines of property and casualty insurance, life insurance, banking and lending and manufacturing. The company concentrates on return on investment and cash flow to build long-term shareholder value, rather than emphasizing on volume or market share.
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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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KB Financial Group Inc (KB): Free Stock Analysis Report
Leucadia National Corporation (LUK): Free Stock Analysis Report
NVE Corporation (NVEC): Free Stock Analysis Report
Nova Measuring Instruments Ltd. (NVMI): Free Stock Analysis Report
Apogee Enterprises, Inc. (APOG): Free Stock Analysis Report
Glaukos Corporation (GKOS): Free Stock Analysis Report
County Bancorp, Inc. (ICBK): Free Stock Analysis Report
DNB Financial Corp (DNBF): Free Stock Analysis Report
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