Time to Add These 5 Relative Price Strength Stocks
Wall Street experienced a strong rebound in the first seven months of 2023, recovering from the disappointments of the previous year. The S&P 500 Index surged nearly 20% during this period. This positive performance can be attributed to the steady decline in inflation rates, a strong labor market and the Federal Reserve's decision to reduce the magnitude of interest rate hikes. The bullish sentiment has even led to U.S. consumer sentiment jumping to the highest level in almost two years.
In particular, the inflation rate is dwindling steadily since June 2022. Consequently, the Fed is approaching the end of its ongoing interest rate hike cycle. The central bank is now more confident about the soft landing of the economy. This could mean a brightening outlook for the stock market.
Investors who want to take advantage of the bullish equity setup should 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 22 stocks that made it through the screen:
Mr. Cooper Group COOP: The company operates in the mortgage refinancing market. Over the past 30 days, this Dallas, TX-based firm saw the Zacks Consensus Estimate for 2023 move up 18.6%. COOP has a VGM Score of A.
Mr. Cooper Group beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 17.3%, on average. COOP shares have gained 31% in a year.
Masco Corporation MAS: It manufactures, sells and installs home improvement and building products. Over the past 30 days, this Livonia, MI-based firm saw the Zacks Consensus Estimate for 2023 move up 4.2%. MAS has a VGM Score of A.
Masco beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 12%, on average. MAS shares have gained 17.7% in a year.
Option Care Health OPCH: The company provides home and alternate-site infusion services in the United States. Over the past 30 days, this Bannockburn, IL-based firm saw the Zacks Consensus Estimate for 2023 move up 25.5%. OPCH has a VGM Score of A.
Option Care Health’s expected EPS growth rate for three to five years is currently 18.8%, which compares favorably with the industry's growth rate of 10.9%. It has a trailing four-quarter earnings surprise of roughly 57%, on average. OPCH shares have decreased 2.9% in a year.
Solaris Oilfield Infrastructure SOI: The company is a provider of technical products and services to drillers of oil and gas wells. The 2023 Zacks Consensus Estimate for the Houston, TX-based firm indicates 13.2% year-over-year earnings per share growth.
Solaris Oilfield Infrastructure beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 18.8%, on average. SOI shares have lost 4.8% in a year.
PulteGroup PHM: Based in Atlanta, GA, PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. Over the past 30 days, this firm saw the Zacks Consensus Estimate for 2023 move up 19.8%. PHM has a VGM Score of B.
The 2023 Zacks Consensus Estimate for PulteGroup indicates 3.2% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 19.5%, on average. PHM shares have increased 102.2% 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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Masco Corporation (MAS) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Solaris Oilfield Infrastructure, Inc. (SOI) : Free Stock Analysis Report
MR. COOPER GROUP INC (COOP) : Free Stock Analysis Report
Option Care Health, Inc. (OPCH) : Free Stock Analysis Report
