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Boost Portfolio Gains With 5 Relative Price Strength Stocks

Nilanjan Choudhury
·6 min read

The novel coronavirus outbreak accompanied a steep sell-off in equities and bonds. Stocks were decimated, major indices crashed regularly, while in a bizarre turn of events U.S. oil futures fell below zero for the first time ever.

However, over the past few weeks, markets, securities and crude have rebounded off their pandemic lows. Deaths and new infections associated with the contagion have slowed down, while certain drug candidates and treatments offer ray of hope in coronavirus fight.   

While the heaviest losses may be in the rear view mirror, the road to recovery remains long and uncertain amid concerns about a second wave of the virus. Moreover, global efforts to combat the pandemic and policy initiatives to rev up economic activity have only had limited impact so far. 

Amid the entire coronavirus-induced mayhem, there are few stocks that held up to the crisis even as the virus knocked down share markets. One of the ways such potential plays could be identified is to look for signs of relative price strength.

The Relative Price Strength Approach

Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential in determining whether a stock’s price performance is better than its peers or the industry average.

If a stock’s performance is lacking that of the broader groups despite impressive earnings growth or valuation multiples, then something must be wrong.

It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industries or benchmarks. This is because betting on a winner always proves to be lucrative.

Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.

Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.

Screening Parameters

Relative % Price change – 12 weeks greater than 0

Relative % Price change – 4 weeks greater than 0

Relative % Price change – 1 week greater than 0

(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)

% Change (Q1) Est. over 4 Weeks greater than 0: Positive current quarter estimate revisions over the last four weeks.

Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks – that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years – can get through. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.

VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 (Buy) offer the best upside potential.

Here are five of the 10 stocks that made it through the screen:

B&G Foods, Inc. BGS: B&G Foods, along with its subsidiaries, manufactures, sells and distributes high quality, shelf stable, frozen food and household products across the United States, Canada and Puerto Rico. The 2020 Zacks Consensus Estimate for this Parsippany, NJ-based company indicates 21.3% earnings per share growth over 2019. B&G Foods has a VGM Score of B.

United Natural Foods, Inc. UNFI: A leading distributor of natural, organic and specialty food and non-food products in the U.S. and Canada, United Natural Foods has a VGM Score of A. Over 30 days, the Providence, RI-based company has seen the Zacks Consensus Estimate for FY 2020 increase 95.7%.

RH RH: RH (formerly known as Restoration Hardware), headquartered in Corte Madera, CA, is a leading luxury retailer in the home furnishing space. The firm has a VGM Score of B and an excellent earnings surprise history having surpassed estimates in each of the last four quarters, the average being 26.6%.

Altra Industrial Motion Corp. AIMC: Altra Industrial Motion is one of the leading manufacturers and distributors of a diversified range of motion control, electromechanical power transmission and automation products. Sporting a VGM Score of A, this Braintree, MA-headquartered company’s expected EPS growth rate for three to five years currently stands at 15%, comparing favorably with the industry's growth rate of 10.9%.

SYNNEX Corporation SNX: Founded in 1980 and headquartered in Fremont, CA, SYNNEX is a leading business process services company. The company has a VGM Score of A and a good earnings surprise history having surpassed estimates in the last four quarters. Earnings surprise was 10.7%, on average.

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 today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today

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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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
RH (RH) : Free Stock Analysis Report
SYNNEX Corporation (SNX) : Free Stock Analysis Report
BG Foods, Inc. (BGS) : Free Stock Analysis Report
Altra Industrial Motion Corp. (AIMC) : Free Stock Analysis Report
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