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Equity market tricks are not easy to master with a deluge of stocks flooding the space at any point of time. This is particularly a daunting task when one tries to select a winning portfolio without proper guidance. With the time constraint confronting us these days, it is in the best interest of investors to be guided by the experts in the field.
Why Pay Heed to Broker Advice?
The experts in the field of investing are brokers. Irrespective of their type (sell-side, buy-side or independent), brokers have a lot more information at their disposal on a company and its prospects. Brokers not only scrutinize the publicly available financial documents but also attend company conference calls and other presentations.
With investors putting in their hard-earned money into the stock market, they naturally want to design a portfolio that would fetch handsome returns. Given their expertise, it is prudent for investors to pay heed to broker advice while formulating their investment strategy.
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 Hold the Key
Since brokers arrive at their recommendation on a stock after thoroughly analyzing the minute details associated with the company, it is natural that if investors see improved recommendation on a particular stock, they are inclined to believe that there is a solid reason 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.
For example, in the wake of plummeting oil prices, analysts are likely to become bullish on an airline stock which might lead them to raise their earnings estimates and improve their target price. The bullish stance adopted by analysts on the stock serves as an important guide for investors. On the other hand, in the event of estimates moving south, which can happen due to lower-than-expected earnings/modest sales or pipeline failure (for a biotech company), investors tend to offload the stock from their portfolio.
The Winning Strategy
Our screen based on improving analyst recommendation and upward revisions to earnings estimates over the last four weeks takes care of the bottom-line performance of stocks. But what about the top line? To take care of its revenue performance, we have included the price/sales ratio which serves as a strong complementary valuation metric.
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 criterion 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 in 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:
Big 5 Sporting Goods Corp. (BGFV - Free Report) was founded in 1955 and is based in El Segundo, CA. This sporting goods retailer has an impressive earnings history, having outshined the Zacks Consensus Estimate in three of the last four quarters. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CNH Industrial N.V. (CNHI - Free Report) , based in Amsterdam , designs, produces and sells trucks, commercial vehicles, buses, special vehicles, agricultural and construction equipment, in addition to engines and transmissions for vehicles and engines for marine application. The Zacks Consensus Estimate for the current year has increased 11.7% to 34 cents per share for the current year. The stock carries a Zacks Rank #2 (Buy).
Genco Shipping & Trading Ltd. (GNK - Free Report) : This Zacks Rank #2 company is based in New York and engages in ocean transportation of drybulk cargoes worldwide. The company reported a positive earnings surprise of 27.34% in the last quarter.
Based in Phoenix, AZ, Avnet Inc., (AVT - Free Report) is one of the world’s largest distributors of electronic components and computer products. This Zacks Rank # 3 (Hold) stock has an impressive earnings history, having outshined the Zacks Consensus Estimate in each of the last four quarters by an average of 2.61%.
Univar Inc. , based in Downers Grove, IL, is a distributor of chemicals and innovative services. The Zacks Rank# 2 company primarily offers solvents, resins, pigments, acids, bases, surfactants, glycols, inorganic compounds and alcohol. The company has an attractive earnings per share growth rate (3–5 years) of 9.13%.
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.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Unique Zacks Analysis of Your Chosen Ticker
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5 Stocks that Brokers Favor Right Now
Equity market tricks are not easy to master with a deluge of stocks flooding the space at any point of time. This is particularly a daunting task when one tries to select a winning portfolio without proper guidance. With the time constraint confronting us these days, it is in the best interest of investors to be guided by the experts in the field.
Why Pay Heed to Broker Advice?
The experts in the field of investing are brokers. Irrespective of their type (sell-side, buy-side or independent), brokers have a lot more information at their disposal on a company and its prospects. Brokers not only scrutinize the publicly available financial documents but also attend company conference calls and other presentations.
With investors putting in their hard-earned money into the stock market, they naturally want to design a portfolio that would fetch handsome returns. Given their expertise, it is prudent for investors to pay heed to broker advice while formulating their investment strategy.
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 Hold the Key
Since brokers arrive at their recommendation on a stock after thoroughly analyzing the minute details associated with the company, it is natural that if investors see improved recommendation on a particular stock, they are inclined to believe that there is a solid reason 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.
For example, in the wake of plummeting oil prices, analysts are likely to become bullish on an airline stock which might lead them to raise their earnings estimates and improve their target price. The bullish stance adopted by analysts on the stock serves as an important guide for investors. On the other hand, in the event of estimates moving south, which can happen due to lower-than-expected earnings/modest sales or pipeline failure (for a biotech company), investors tend to offload the stock from their portfolio.
The Winning Strategy
Our screen based on improving analyst recommendation and upward revisions to earnings estimates over the last four weeks takes care of the bottom-line performance of stocks. But what about the top line? To take care of its revenue performance, we have included the price/sales ratio which serves as a strong complementary valuation metric.
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 criterion 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 in 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:
Big 5 Sporting Goods Corp. (BGFV - Free Report) was founded in 1955 and is based in El Segundo, CA. This sporting goods retailer has an impressive earnings history, having outshined the Zacks Consensus Estimate in three of the last four quarters. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CNH Industrial N.V. (CNHI - Free Report) , based in Amsterdam , designs, produces and sells trucks, commercial vehicles, buses, special vehicles, agricultural and construction equipment, in addition to engines and transmissions for vehicles and engines for marine application. The Zacks Consensus Estimate for the current year has increased 11.7% to 34 cents per share for the current year. The stock carries a Zacks Rank #2 (Buy).
Genco Shipping & Trading Ltd. (GNK - Free Report) : This Zacks Rank #2 company is based in New York and engages in ocean transportation of drybulk cargoes worldwide. The company reported a positive earnings surprise of 27.34% in the last quarter.
Based in Phoenix, AZ, Avnet Inc., (AVT - Free Report) is one of the world’s largest distributors of electronic components and computer products. This Zacks Rank # 3 (Hold) stock has an impressive earnings history, having outshined the Zacks Consensus Estimate in each of the last four quarters by an average of 2.61%.
Univar Inc. , based in Downers Grove, IL, is a distributor of chemicals and innovative services. The Zacks Rank# 2 company primarily offers solvents, resins, pigments, acids, bases, surfactants, glycols, inorganic compounds and alcohol. The company has an attractive earnings per share growth rate (3–5 years) of 9.13%.
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.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »