Bottom Fishing for Beaten-Down Stocks
In this week's screen, I'm searching for companies that I usually don't search for; bottomed out stocks that have recently hit or are trading near their 52-week lows.
If the broader markets hit bottom back on Oct 10 with the Dow at 7,882.51, then most solid companies should see their stock prices go higher.
But in this screen, I'm particularly interested in those stocks that have recently hit a potential bottom. Not just any bottom, but a recent 52-week low.
I'm looking for these kinds of stocks because some spectacular stocks have completely bucked the falling market's downtrend. And while many of these stocks will continue to do so, some will now fall or become out of favor as new Sectors and Industries take on leadership roles.
But as the market recovers and these stocks begin to get noticed, there should have some excellent upside potential.
Parameters
- Zacks Rank
The Zacks Rank is one of the best Ranking systems out there, with the Zacks #1 Ranks showing an average annual return of over 30%, and the Zacks #2 Ranks nearly 20%. The Zacks #4 Ranks and Zacks #5 Ranks, which are Sells and Strong Sells, have underperformed the market with returns of less than half as much and worse - so we're keeping those off of our list. -
% Change in F(1) Earnings Estimates over the last 4 weeks >= 0
- % Change in F(2) Earnings Estimates over the last 4 weeks >= 0
We want to make sure that the analysts covering them are raising their estimates and getting more bullish on the stocks. And looking at the full-year estimate revisions helps to show how analysts feel about the companies beyond just 1 or 2 quarters. -
Year over Year Projected EPS Growth > 20
These companies need a growth story. Without any growth, it's hard to make a case for a sustained rally. So a brighter future for these companies is a must. - Current Price/52 Week High-Low Range
Stocks trading at their 52-Week low will have a ratio value of 0. Stocks with a ratio value of .2 means it's 20% above the low. This screen looks for companies less than 20% off the low. In other words, it can be on the low, just a bit off the low or even up to 20% above it. But we're excluding companies more than 20% above the low as we want to make sure that we are not getting into stocks that might be overextended on the upside. - I'm also applying the above parameters to stocks over $5 with over 100,000 shares traded.
This week (10/28/08), the screen produced 67 companies. Here are 5 of them:
ANDE - Analyst Report Andersons, Inc.
ECLP - Analyst Report Eclipsys Corp.
FLO - Snapshot Report Flowers Foods, Inc.
MIC - Snapshot Report Macquarie Infrastructure Co.
NTLS - Snapshot Report Ntelos Holding Corp.
This screen can easily be created on the free Custom Screener on Zacks.com.
Try creating it yourself.
Below is an image of what it looks like if you put in the criteria correctly. Use this as a guide:
You can also supercharge your screen by using the Research Wizard stock-picking and backtesting program. And of course, with the Research Wizard, you can backtest it to see how it works. Then, you can refine it and tweak it until you get it just right.
You'll find that a lot of these stocks have put in double-bottoms, or rounded bottoms, or spike bottoms, or even inverted head-and-shoulder bottoms. And for anybody who looks at charts, it's a great way to put fundamentally-improving companies with bottoming chart formations onto your radar screen.
Get the rest of the stocks on this list and start your search for more bottomed-out stocks with the likelihood of turning higher. It's easy to do.
Get started with the Free Screener of Zacks.com.
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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.