The sole aim of stock investors is to generate handsome returns from their portfolio as they put their hard earned money into it. However, with stocks flooding the market, it is by no means an easy task to arrive at a winning portfolio.

Moreover, the same basket of stocks is not always likely to be the winner given the ever-changing global environment. For example, in a regime of extremely low oil prices, it might be a winning strategy to add airline stocks to one’s portfolio, but the same stocks might not be prudent choices when oil prices surge. To insulate one’s portfolio from surrounding uncertainties, maintaining a well-diversified portfolio (selecting stocks from different industries) is a tried and tested strategy culminating in handsome returns.

In view of the above commentary, it is clear that investors need to indulge in thorough research on minute details like the long-term prospect of a stock before owning it. However, given the constraints that individual investors face, the task is best left to experts – brokers/analysts – on the subject.

Why Pay Heed to Broker Advice?

The opinion of brokers acts as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock. Broker ratings do not come from the blue and are backed by sound logic. In fact, they have a lot more information on a company and its prospects than individual investors as they not only scrutinize the publicly available financial documents, but also attend company conference calls and other presentations. Given their expertise, it is prudent for investors to pay heed to broker advice while formulating their investment strategy for generating handsome returns.

Direction of Earnings Estimates: An Invaluable Guide

Since brokers follow the stocks in their coverage minutely, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. In fact, a rating upgrade or downgrade by brokers has the potential to immediately influence the price of the stock.

Since brokers arrive at their recommendation on a stock after thoroughly analyzing the nitty-gritties associated with the company, it is natural that if investors see them improving their recommendation on a particular stock, they are inclined to believe that there is a solid reason/logic behind it. In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.

Estimates can move north for a number of reasons – favorable earnings performance, a bullish guidance, product launch or any favorable macro scenario.

Revenue Performance- Not to be Ignored

According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar. To take care of the top line, we have considered the price/sales ratio for screening stocks.

Screening Criteria

# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks.

% change in Q (1) est. (4 weeks) = Top #10: This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter.

To ensure that the strategy is a full-proof and winning one, we have added the following screening parameters:

Price-to-Sales = Bot%10: The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio.

Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.

Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.

Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization.

Com/ADR/Canadian= Com: This takes out the ADR and Canadian stocks.

Here are five of the 10 stocks that made it through the screen:

Dean Foods Company , based in Dallas, TX, is a leading processor and distributor of milk and other dairy products in the U.S. as well as a leading manufacturer of various specialty food products. The company has an impressive track with respect to earnings, having surpassed the Zacks Consensus Estimate in each of the last four quarters by an average of 17.8%.

Cooper-Standard Holdings Inc. (CPS Quick QuoteCPS - Free Report) , based in Novi, MI, operates as a supplier of systems and components for the automotive industry. Its products include sealing and trim, fuel and brake delivery, fluid transfer, thermal and emissions and anti-vibration systems. The company has an impressive record with respect to earnings, having surpassed the Zacks Consensus Estimate in each of the last four quarters by an average of 51.2%.

Boise Cascade Company (BCC Quick QuoteBCC - Free Report) , based in Boise, ID, operates as a wood products manufacturer and building materials distributor. The company has an impressive track with respect to earnings, having surpassed the Zacks Consensus Estimate in three of the last four quarters by an average in excess of 100%.

Pittsburgh, PA-based United States Steel Corp. (X Quick QuoteX - Free Report) is a leading steel manufacturer in the U.S. It produces and sells steel mill products – including flat-rolled and tubular products – in North America and Europe. For 2016, the company’s earnings per share are projected to grow at 75.80%, much higher than the industry average of 5.8%.

AECOM Technology Corp. (ACM Quick QuoteACM - Free Report) is a leading solutions provider for supporting professional, technical and management solutions for diverse industries across end markets like transportation, facilities, government as well as those in environmental, energy and water businesses. The company has a healthy projected EPS growth rate (over the next 3–5 years) of 10.8%.

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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