How to Find 'Strong Buy' Stocks to Fight Market Uncertainty
The S&P 500 and the Nasdaq both touched fresh 52-week lows Tuesday morning as Wall Street prepares to enter the heart of the third-quarter earnings season later this week. Investors are also eagerly awaiting the release of September inflation data on October 13. Stocks did show some signs of life through mid-day trading as the market tried to snap a four-day losing streak.
The overall S&P 500 earnings picture has deteriorated somewhat quickly since the summer as inflation and rising interest rates eat away at consumer spending and therefore economic growth and corporate profits. JPMorgan, Citigroup, and other giants kick start the busy portion of the quarterly earnings season at the end of the week. Investors will be looking to guidance more than ever for signs of economic health in the fourth quarter and heading into the early part of 2023.
September’s CPI data due out Thursday is another key test for the market, with investors hoping to see any signs of cooling prices. The yield on 10-year U.S. Treasuries have climbed back up since the start of the month but still remain below their recent 4% peaks.
The market and economic turmoil might have many investors staying on the sidelines. But parking your money in cash comes with an 8% charge at the moment and buying bonds can produce negative real returns.
Investors could be better suited to buy stocks that have upped their earnings outlooks amid the broader downturn and might be poised to outperform the market going forward. Investors can utilize the Filtered Zacks Rank 5 Stock Screen to find potential winners who have provided upbeat bottom-line guidance as the wider earnings outlook fades.
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.
Parameters
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…
Black Stone Minerals, L.P. BSM
Black Stone Minerals is one of the largest owners of oil and natural gas mineral interests in the U.S. Black Stone Minerals owns mineral interests and royalty interests in 41 states. BSM operates under the philosophy that its “large, diversified asset base and long-lived, non-cost-bearing mineral and royalty interests provide for stable to growing production and reserves over time, allowing the majority of generated cash flow to be distributed to unitholders.”
BSM’s dividend currently yields a whopping 9.8% to beat out its industry’s 8.2% average. Black Stone Minerals’ Energy and Pipeline - Master Limited Partnerships industry sits in the top 1% of over 250 Zacks industries right now. BSM shares have soared 165% in the past two years vs. its industry’s 145%. This includes a 15% pop in the past six months. Plus, its top and bottom-line outlooks are rather impressive.
Oxford Industries, Inc. OXM
Oxford Industries is a somewhat under-the-radar apparel standout that owns Tommy Bahama, Lilly Pulitzer, Southern Tide, and other smaller brands. Oxford Industries has expanded its portfolio over the years and it posted huge growth in 2021. The company most recently topped our Q2 estimates at the start of September and provided upbeat guidance, with its FY22 Zacks Consensus EPS estimate up 6% and FY23’s figure over 12% improved.
Zacks estimates call for Oxford Industries to post 22% revenue growth in 2022 and another 13% in 2023, alongside 31% and 11%, respective EPS expansion. The growth outlook highlights the continued strength of its higher-income consumers. The company also flexed its growth-focused muscles when it announced the purchase of another brand, Johnny Was, on Sept. 19. OXM’s 2.5% dividend yield tops its industry and Nike’s 1.4%. Plus, Oxford Industries stock has climbed 110% in the past two years, while managing to pop 2% in the trailing six months.
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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