8 Stocks with Recent Price Strength for Improved Returns
“In the stock game, winning means reaching a higher price.” However, striking the right chord each time needs a fair amount of luck.
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 fall into the value trap if the hidden weaknesses in a 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?
Sounds a good idea? Here is how to execute it:
One should primarily target stocks that have recently been on a bullish run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously on an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create the 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.
Screening Parameters:
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 17 stocks that made it through this screen:
SORL Auto Parts Inc. SORL specializes in the development, production and distribution of air brake valves and hydraulic brake valves. The stock has surpassed the Zacks Consensus Estimate in all the trailing four quarters with an average positive surprise of 94.53%.
Nova Measuring Instruments Ltd. NVMI develops, produces and markets monitoring and measurement systems for the semiconductor manufacturing industry. The stock has surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average positive surprise of 30.83%.
Weight Watchers International, Inc. WTW is the largest provider of weight control programs in the world. 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 24.31%.
KMG Chemicals Inc. KMG manufactures, markets and distributes specialty, niche chemicals. 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 10.63%.
SunOpta Inc. STKL is an operator of high-growth ethical businesses, focusing on integrated business models in the natural and organic food, supplements and health and beauty markets. Last quarter, the company posted a positive earnings surprise of 50%.
U.S. Concrete Inc. USCR operates as a provider of ready-mixed concrete and concrete-related products and services to the construction industry in the United States. Last quarter, the company posted a positive earnings surprise of 318.18%.
M/I Homes, Inc. MHO is one of the nation's leading builders of single-family homes. Last quarter, the company posted a positive earnings surprise of 44.74%.
Pampa Energía S.A. PAM is the largest fully integrated electricity company in Argentina. Through its subsidiaries, the company is engaged in the generation, transmission and distribution of electricity in Argentina.
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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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