Powell vowed once again last Friday to keep the Fed’s inflation fight going, which means higher interest rates. The Fed chair also stressed once again the central bank’s willingness to cause pain in the form of higher unemployment and slowing growth, if that is what it takes to drag down prices.
Unfortunately, the Fed’s job seems to be growing increasingly difficult as a multitude of factors continue to push prices higher. Ongoing supply chain and shipping bottlenecks rattle companies, while labor shortages drive up wages. On top of that, many consumers, especially higher-income Americans, continue to spend exuberantly as they go about their normal lives after several years of covid restrictions.
The Russian invasion of Ukraine continues to impact the supply of oil, natural gas, wheat, corn, and other commodities. Plus, 50-year low unemployment, an aging population, and many other factors are keeping prices stubbornly high at present.
All of these factors are making the Fed’s job difficult and likely forcing it to keep lifting rates at higher clips. Wall Street had already started to reverse its peak inflation bet and the selling really ramped up following Powell’s speech. The S&P 500, the Nasdaq, and the Dow have now seen over a month worth of gains washed away.
The current market backdrop should force investors to hone in even more on strong stocks that have been able to guide higher as inflation chips away at earnings.
Here’s how investors can utilize the Filtered Zacks Rank 5 Stock Screen to find potential winners as the Fed remains hawkish heading into September.
Zacks Rank #1 (Strong Buy) stocks outperform the market in both good and bad times. However, there are over 200 stocks that earn a Zacks Rank #1 at any given time. Therefore, it’s helpful to understand how to apply filters to the Zacks Rank in order to narrow the list down to a more manageable and tradable set of stocks.
Clearly, there are only three items on this screen. But together, these three filters can result in some impressive returns.
• Zacks Rank equal to 1
Starting with a Zacks Rank #1 is often a strong jumping off point because it boasts an average annual return of roughly 24.4% per year since 1988.
• % Change (Q1) Est. over 4 Weeks greater than 0
Positive current quarter estimate revisions over the last four weeks.
• % Broker Rating Change over 4 Week equal to Top # 5
Top 5 stocks with the best average broker rating changes over the last four weeks.
This strategy comes loaded with the Research Wizard and is called bt_sow_filtered zacks rank5. It can be found in the SoW (Screen of the Week) folder.
Here are two of the five stocks that qualified for the Filtered Zacks Rank 5 strategy today…
BlackRock TCP Capital TCPC
BlackRock TCP Capital is a specialty finance company that’s core business to direct lending to middle-market companies and small businesses. TCPC lends primarily to companies with established market positions, as well as strong regional or national operations. BlackRock TCP also aims to lend to firms with differentiated products and services and sustainable competitive advantages.
BlackRock TCP topped our Q2 earnings and revenue estimates in early August and upped its guidance. Zacks estimates call for the firm to post solid top and bottom-line growth both this year and next. Plus, its Financial - SBIC & Commercial Industry ranks in the top 6% over 250 Zacks industries. The stock has moved sideways in 2022 as the market falls, and its nearly 9% dividend yield matches its industry.
Global Partners GLP
Global Partners is one of the largest independent owners, suppliers, and operators of gas stations and convenience stores in the Northeast, boasting over 1,500 locations. GLP also owns, controls, or has access to one of the largest terminal networks in New England and New York. Global Partners then distributes gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers, and commercial customers. The firm also transports petroleum products and renewable fuels by rail from the mid-continental U.S. and Canada.
Global Partners is part of the Oil and Gas - Refining and Marketing-Master Limited Partnerships space that is in the top 19% of Zacks industries. The company has crushed our bottom-line estimates in the trailing four quarters by an average of 260%, including a 94% beat in early August. Analysts raced to update their EPS outlooks for FY22 and FY23 as the oil and gas industry continues to boom. GLP shares have surged 20% YTD and its 8.3% dividend yield tops its industry’s average.
See the rest of the stocks on this list and start trading the Filtered Zacks Rank 5 (or any of our other strategies) in your own account. Remember, the key to successful screening is finding screens that have produced profitable results in the past. And that's exactly what you get with the Research Wizard stock picking and backtesting program.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
Click here to sign up for a free trial to the Research Wizard today.
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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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