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Proper guidance is often the difference between success and failure in life. The same holds true for the investing world as well. The need for proper guidance from brokers is all the more required now as the Q3 earnings season is underway and investors will target stocks that have the potential to surpass earnings expectations in the current reporting cycle. This is because an earnings beat generally leads to stock price appreciation.
The task of designing one’s portfolio with outperformers is by no means an easy one. This is because, a deluge of stocks flood the market at any given point in time. In the absence of proper guidance, identifying a winning stock is akin to searching for ‘a needle in a haystack’, for an investor. Proper guidance, in this respect, comes from brokers, who are deemed experts, equipped with vast knowledge and know how as far the field of investing is concerned.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide unbiased opinion to investors after thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
Be Guided by Broker Advice
Brokers, not only scrutinize the publicly available financial documents, but also attend company conference calls and other presentations. Naturally, it is in the best interest of investors to pay heed to such well-researched information as they aim to generate maximum returns from their portfolio. The estimate revisions serve as an important pointer regarding the price of a stock. In fact, a rating upgrade normally leads to stock price appreciation and vice versa.
One of the well-accepted investment strategies is to maintain a diversified portfolio to generate handsome returns irrespective of the market conditions. For instance, in the face of extremely low oil prices, analysts adopt a bullish stance on airline stocks and consequently raise estimates. Naturally, adding such stocks to one’s portfolio in such a scenario might prove to be a winning strategy. Similarly, analysts might trim estimates and downgrade a stock following adverse events like lackluster earnings or pipeline failure (for a biotech player). Unsurprisingly, investors look to offload such stocks from their portfolio on the basis of broker advice.
To take care of the earnings performance, we have designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it has also been included. The price/sales ratio takes care of the company’s top line, thereby making the strategy foolproof.
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 winning one, covering all bases, 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 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 United States as well as a leading manufacturer of various specialty food products. This Zacks Rank #3 (Hold) company has a healthy 7% expected EPS growth rate for 3–5 years.
Based in Columbus, OH and founded in 1967, Big Lots (BIG - Free Report) is a broad-line closeout retailer in the United States. The company offers products under various merchandising categories, which include Food, Consumables, Furniture, Seasonal, Soft Home, Hard Home, and Electronics & Accessories. The company has an impressive track record with respect to earnings, having surpassed the Zacks Consensus Estimate in each of the past four quarters by an average of 81.1%. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Leawood, KS-based AMC Entertainment Holdings, Inc. (AMC - Free Report) is engaged in the theatrical exhibition business. The company has an impressive track record with respect to earnings, having surpassed the Zacks Consensus Estimate in three of the past four quarters by an average of 120.1%. The stock carries a Zacks Rank #3.
Commercial Metals Company (CMC - Free Report) manufactures, recycles, and markets steel and metal products, and related materials and services in the United States and internationally. The company has surpassed the Zacks Consensus Estimate in two of the last four quarters by an average of 23.4%. The stock carries a Zacks Rank #2.
Delek US Holdings, Inc. (DK - Free Report) operates as an integrated energy company that provides petroleum refining and transportation services. The company operates in two segments, Refining and Logistics. The company has seen the Zacks Consensus Estimate for current-quarter earnings being revised 19% upward over the last 30 days. The stock carries a Zacks Rank #2.
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 »
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5 Broker Favorite Stocks to Keep an Eye On
Proper guidance is often the difference between success and failure in life. The same holds true for the investing world as well. The need for proper guidance from brokers is all the more required now as the Q3 earnings season is underway and investors will target stocks that have the potential to surpass earnings expectations in the current reporting cycle. This is because an earnings beat generally leads to stock price appreciation.
The task of designing one’s portfolio with outperformers is by no means an easy one. This is because, a deluge of stocks flood the market at any given point in time. In the absence of proper guidance, identifying a winning stock is akin to searching for ‘a needle in a haystack’, for an investor. Proper guidance, in this respect, comes from brokers, who are deemed experts, equipped with vast knowledge and know how as far the field of investing is concerned.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide unbiased opinion to investors after thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
Be Guided by Broker Advice
Brokers, not only scrutinize the publicly available financial documents, but also attend company conference calls and other presentations. Naturally, it is in the best interest of investors to pay heed to such well-researched information as they aim to generate maximum returns from their portfolio. The estimate revisions serve as an important pointer regarding the price of a stock. In fact, a rating upgrade normally leads to stock price appreciation and vice versa.
One of the well-accepted investment strategies is to maintain a diversified portfolio to generate handsome returns irrespective of the market conditions. For instance, in the face of extremely low oil prices, analysts adopt a bullish stance on airline stocks and consequently raise estimates. Naturally, adding such stocks to one’s portfolio in such a scenario might prove to be a winning strategy. Similarly, analysts might trim estimates and downgrade a stock following adverse events like lackluster earnings or pipeline failure (for a biotech player). Unsurprisingly, investors look to offload such stocks from their portfolio on the basis of broker advice.
To take care of the earnings performance, we have designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it has also been included. The price/sales ratio takes care of the company’s top line, thereby making the strategy foolproof.
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 winning one, covering all bases, 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 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 United States as well as a leading manufacturer of various specialty food products. This Zacks Rank #3 (Hold) company has a healthy 7% expected EPS growth rate for 3–5 years.
Based in Columbus, OH and founded in 1967, Big Lots (BIG - Free Report) is a broad-line closeout retailer in the United States. The company offers products under various merchandising categories, which include Food, Consumables, Furniture, Seasonal, Soft Home, Hard Home, and Electronics & Accessories. The company has an impressive track record with respect to earnings, having surpassed the Zacks Consensus Estimate in each of the past four quarters by an average of 81.1%. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Leawood, KS-based AMC Entertainment Holdings, Inc. (AMC - Free Report) is engaged in the theatrical exhibition business. The company has an impressive track record with respect to earnings, having surpassed the Zacks Consensus Estimate in three of the past four quarters by an average of 120.1%. The stock carries a Zacks Rank #3.
Commercial Metals Company (CMC - Free Report) manufactures, recycles, and markets steel and metal products, and related materials and services in the United States and internationally. The company has surpassed the Zacks Consensus Estimate in two of the last four quarters by an average of 23.4%. The stock carries a Zacks Rank #2.
Delek US Holdings, Inc. (DK - Free Report) operates as an integrated energy company that provides petroleum refining and transportation services. The company operates in two segments, Refining and Logistics. The company has seen the Zacks Consensus Estimate for current-quarter earnings being revised 19% upward over the last 30 days. The stock carries a Zacks Rank #2.
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 »