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Ride on Relative Price Strength With These 5 Quality Plays
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The year 2022 has been full of choppy back-and-forth action in the stock market, with inflation and recession concerns at the fore. Even now, the picture is quite mixed.
While Fed’s scaled-back rate hike of 50 basis points, following four back-to-back increases of 75 basis points each, provided a much-needed respite to the economy, worries over a tight labor market and the lowering of next year’s GDP to 0.5% from the previous estimate of 1.2%, played spoilsport.
In the current jittery market environment, investors who might want to stay exposed to the 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
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential for determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.
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 the five stocks that made it through the screen:
Tecnoglass (TGLS - Free Report) : The firm produces, sells and installs architectural glass and related aluminum products for residential construction markets. The 2022 Zacks Consensus Estimate for Colombia-based Tecnoglass indicates 82.2% year-over-year earnings per share growth. TGLS has a VGM Score of B.
Tecnoglass beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 26.9%, on average. TGLS stock has gained 31% in a year.
Scorpio Tankers (STNG - Free Report) : Based in Monaco, the company is a leading owner and operator in the tanker industry with a focus on the product carriers segment. Scorpio Tankers’ expected EPS growth rate for three to five years is currently 42.5%, which compares favorably with the industry's growth rate of 19.2%. STNG has a VGM Score of B.
Notably, Scorpio Tankers beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 19.4%, on average. STNG shares have gone up 354.2% in a year.
DCP Midstream Partners : This leading energy infrastructure firm has a diversified portfolio of gathering, logistics, marketing, and processing assets. DCP Midstream has a VGM Score of A. Over the past 60 days, Denver, CO-based DCP saw the Zacks Consensus Estimate for 2022 move up 23.1%.
DCP Midstream beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 25.5%. Valued at around $8.1 billion, DCP has gained 58.9% in a year.
Titan Machinery (TITN - Free Report) : The company is an agricultural and construction equipment retailer in the United States and Europe. The fiscal 2023 Zacks Consensus Estimate for this West Fargo, ND-based firm indicates 61.7% year-over-year earnings per share growth. TITN has a VGM Score of B.
Titan Machinery beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 59.9%, on average. TITN shares have gained 25.3% in a year.
Olympic Steel (ZEUS - Free Report) : It is engaged in metal processing and distribution across the USA.. Olympic Steel has a VGM Score of A. Over the past 60 days, Cleveland, OH-based ZEUS saw the Zacks Consensus Estimate for 2022 move up 4.8%.
Olympic Steel beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 25.4%. Valued at around $359.3 million, ZEUS has increased 45.3% in a year.
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.
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.
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Ride on Relative Price Strength With These 5 Quality Plays
The year 2022 has been full of choppy back-and-forth action in the stock market, with inflation and recession concerns at the fore. Even now, the picture is quite mixed.
While Fed’s scaled-back rate hike of 50 basis points, following four back-to-back increases of 75 basis points each, provided a much-needed respite to the economy, worries over a tight labor market and the lowering of next year’s GDP to 0.5% from the previous estimate of 1.2%, played spoilsport.
In the current jittery market environment, investors who might want to stay exposed to the 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
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential for determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.
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 the five stocks that made it through the screen:
Tecnoglass (TGLS - Free Report) : The firm produces, sells and installs architectural glass and related aluminum products for residential construction markets. The 2022 Zacks Consensus Estimate for Colombia-based Tecnoglass indicates 82.2% year-over-year earnings per share growth. TGLS has a VGM Score of B.
Tecnoglass beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 26.9%, on average. TGLS stock has gained 31% in a year.
Scorpio Tankers (STNG - Free Report) : Based in Monaco, the company is a leading owner and operator in the tanker industry with a focus on the product carriers segment. Scorpio Tankers’ expected EPS growth rate for three to five years is currently 42.5%, which compares favorably with the industry's growth rate of 19.2%. STNG has a VGM Score of B.
Notably, Scorpio Tankers beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 19.4%, on average. STNG shares have gone up 354.2% in a year.
DCP Midstream Partners : This leading energy infrastructure firm has a diversified portfolio of gathering, logistics, marketing, and processing assets. DCP Midstream has a VGM Score of A. Over the past 60 days, Denver, CO-based DCP saw the Zacks Consensus Estimate for 2022 move up 23.1%.
DCP Midstream beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 25.5%. Valued at around $8.1 billion, DCP has gained 58.9% in a year.
Titan Machinery (TITN - Free Report) : The company is an agricultural and construction equipment retailer in the United States and Europe. The fiscal 2023 Zacks Consensus Estimate for this West Fargo, ND-based firm indicates 61.7% year-over-year earnings per share growth. TITN has a VGM Score of B.
Titan Machinery beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 59.9%, on average. TITN shares have gained 25.3% in a year.
Olympic Steel (ZEUS - Free Report) : It is engaged in metal processing and distribution across the USA.. Olympic Steel has a VGM Score of A. Over the past 60 days, Cleveland, OH-based ZEUS saw the Zacks Consensus Estimate for 2022 move up 4.8%.
Olympic Steel beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 25.4%. Valued at around $359.3 million, ZEUS has increased 45.3% in a year.
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.