Own These 5 Stocks to Gain From Their Relative Price Strength
Following a two-month long bull run, volatility has returned to the market. Wall Street closed lower for the third consecutive session on Tuesday as investors looked ahead to this week’s monetary-policy symposium, which was set to be held in Jackson Hole. Fed Chairman Jerome Powell is expected to provide an important indication regarding the central bank’s stance on the economy. While no decision on interest rate hike will be taken in the meeting, it is likely to revolve around high inflation and slowing growth.
As of now, trading is expected to be choppy, considering the central bank’s goal of squashing inflation and keeping expectations about future price gains in check. Risks stemming from recession fears, geopolitical tensions and dwindling liquidity will also lead to a rough road for equities.
In the current jittery market environment, for investors who might want to stay exposed to the equity setup, it is time to focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers, or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.
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 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings 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 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 30 stocks that made it through the screen:
Tecnoglass TGLS: The Colombia-based firm produces, sells and installs architectutal glass and related aluminum products for residential construction markets. Founded in 1984, Tecnoglass has a VGM Score of B.
For 2022, TGLS has a projected earnings growth rate of 47.7%. Valued at around $1.2 billion, Tecnoglass shares have gained 8.6% in a year.
Clean Harbors CLH: It is a well-known environmental service company focusing on waste disposal and recycling. Clean Harbors has a VGM Score of B. Over the past 30 days, Norwell, MA-based CLH saw the Zacks Consensus Estimate for 2022 move up 52.7%.
Clean Harbors beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 37.5%. Valued at around $6.2 billion, CLH has gained 15.8% in a year.
Target Hospitality TH: The Woodlands, TX-based firm is a leading provider of specialty Rental remote accommodation assets in the United States. Founded in 1978, Target Hospitality has a VGM Score of B.
For 2022, TH has a projected earnings growth rate of 2,840%. Target Hospitality beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 135.3%, on average. TH shares have gained 330.4% in a year.
Super Micro Computer SMCI: Super Micro Computer offers state-of-the-art server and storage systems covering Artificial Intelligence, Cloud Servers, IoT and 5G Telco infrastructure. The fiscal 2023 Zacks Consensus Estimate for this San Jose, CA-based firm indicates 32.7% year-over-year earnings per share growth. SMCI has a VGM Score of B.
Super Micro Computer beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 20.3%, on average. SMCI shares have gained 88.3% in a year.
Murphy USA MUSA: Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States. The 2022 Zacks Consensus Estimate for the El Dorado, AR-based firm indicates 43.4% year-over-year earnings per share growth. MUSA has a VGM Score of B.
Murphy USA beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 49%, on average. MUSA shares have gained around 92.8% in a year.
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.
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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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Murphy USA Inc. (MUSA) : Free Stock Analysis Report
Clean Harbors, Inc. (CLH) : Free Stock Analysis Report
Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report
Tecnoglass Inc. (TGLS) : Free Stock Analysis Report
Target Hospitality Corp. (TH) : Free Stock Analysis Report
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