U.S. markets closed

Pick These 5 Stocks With Superb Relative Price Strength

Nilanjan Choudhury

The novel coronavirus outbreak triggered an unprecedented sell-off in equities and bonds. Stocks were clobbered, major indices crashed regularly, while in a bizarre turn of events U.S. oil futures hit negative territory.

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 built to survive the crisis. One of the ways such potential plays could be identified is to look for signs of relative price strength.

The 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 important to measure the performance of such a stock relative to its industry or peers, or the appropriate benchmark.

If you see that a stock is underperforming on fundamental factors, then 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 to provide 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 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 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 11 stocks that made it through the screen:

Veritone, Inc. VERI: Veritone is a leading provider of artificial intelligence technology and solutions. The 2020 Zacks Consensus Estimate for this Costa Mesa, CA-based company indicates 42.8% earnings per share growth over 2019. Next year’s average forecast points to another 23.9% growth. Veritone has a VGM Score of B.

Avenue Therapeutics, Inc. ATXI: A specialty pharmaceutical company focused on developing treatment for acute/intensive care hospital setting, Avenue Therapeutics has a VGM Score of A. Over 30 days, the New York-based company has seen the Zacks Consensus Estimate for 2020 and 2021 increase 21.3% and 5.5%, respectively.

Turtle Beach Corporation HEAR: Turtle Beach, headquartered in San Diego, CA, is a leading maker of video game headsets. 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 46.4%.

BJ’s Wholesale Club Holdings, Inc. BJ: BJ’s Wholesale is an operator of membership warehouse clubs primarily in the U.S. East Coast. Sporting a VGM Score of A, this Westborough, MA-headquartered company’s expected EPS growth rate for three to five years currently stands at 11%, comparing favorably with the industry's growth rate of 10.2%.

Atlas Air Worldwide Holdings, Inc. AAWW: A leading global provider of outsourced aircraft and aviation operating services, Atlas Air Worldwide has a VGM Score of A. Over 30 days, the Purchase, NY-based company has seen the Zacks Consensus Estimate for 2020 and 2021 increase 27.1% and 14.3%, respectively.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BJs Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
Turtle Beach Corporation (HEAR) : Free Stock Analysis Report
Atlas Air Worldwide Holdings (AAWW) : Free Stock Analysis Report
Veritone, Inc. (VERI) : Free Stock Analysis Report
Avenue Therapeutics, Inc. (ATXI) : Free Stock Analysis Report
To read this article on Zacks.com click here.