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Watch Out for These 5 Stocks After Broker Rating Upgrades
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The Q3 reporting cycle, which is almost over, has unveiled a healthy picture. With only a handful of companies left to report, the season is expected to end on a high, displaying significant earnings growth. In addition to recording bottom-line growth, a sizeable number of companies have reported better-than-expected earnings per share.
Generally, an earnings beat leads to stock price appreciation. Given this favorable background, investors would like to add outperformers to their portfolios as they strive to design a portfolio of stocks that will fetch them handsome returns.
However, the task is by no means an easy one. This is because the investing world is full of uncertainties and stock prices are sensitive to recent developments. Additionally, the same group of stocks may not work under all circumstances.
For example, airline stocks may benefit from declining oil prices but may fall out of favor in the event of oil prices moving up. One of the well-accepted strategies to brave market uncertainties is to maintain a well-diversified (i.e. include stocks from different industries) portfolio.
Therefore, selecting the right stocks involves thorough research and cannot be done arbitrarily. With time at a premium these days, it is next to impossible for investors to go through the extensive process. Given this backdrop, it is in the best interest of investors to seek guidance from “experts in the field”. The concerned experts are brokers.
Such investment specialists attend conference calls, company presentations and also interact with management. Brokers revise their earnings estimates after carefully examining the pros and cons of an event for the concerned stock. Naturally, their stock related actions (upgrade or downgrade) serve as an invaluable guide as far as fixing the target price of a stock(s) is concerned as they have a lot more information on a company and its prospects than individual investors. In fact, a rating upgrade normally leads to stock price appreciation and vice versa.
The above write-up clearly suggests that by following broker actions, one can arrive at a winning portfolio of stocks. Keeping this in mind, we have designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions to earnings estimates 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 been included. The price/sales ratio takes care of the company’s top line, making the strategy effective.
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 criteria are in the 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:
Verso Corporation is a key player in the paper industry. The company, based in Memphis, United States, focuses on the production of coated freesheet, coated ground wood and uncoated super calendered papers and pulp. Current quarter estimates for this Zacks Rank #2 (Buy) stock have been revised 60% higher over the last seven days.
Boise Cascade Company (BCC - Free Report) is one of the largest producers of engineered wood products and plywood in North America and a leading wholesale distributor of building products in the United States. The expected earnings per share growth rate for this Zacks Rank #1 company, based in Boise, ID, over the next three-five years stands at a healthy 18.5%.
Beazer Homes USA (BZH - Free Report) is one of the country’s largest single-family homebuilders with a presence in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia. This Zacks Rank #3 company, based in Atlanta, GA, has an impressive earnings track record, having surpassed expectations in three of the last four quarters with an average surprise of 130.5%.
California Resources Corporation (CRC - Free Report) , headquartered in Los Angeles, CA, is an oil and natural gas exploration and production company. Its current-year earnings are expected to grow 39.9%. The stock carries a Zacks Rank #2.
Bristow Group is a leading provider of helicopter services for major transportation operations in the United States, Gulf of Mexico and the North Sea and other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia and Trinidad. The company, based in Houston, TX, has delivered an impressive earnings surprise of 65.3% in the most recent quarter. It has seen its stock price rally in excess of 89% over the last three months. The stock carries a Zacks Rank #3.
Get the remaining stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
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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Watch Out for These 5 Stocks After Broker Rating Upgrades
The Q3 reporting cycle, which is almost over, has unveiled a healthy picture. With only a handful of companies left to report, the season is expected to end on a high, displaying significant earnings growth. In addition to recording bottom-line growth, a sizeable number of companies have reported better-than-expected earnings per share.
Generally, an earnings beat leads to stock price appreciation. Given this favorable background, investors would like to add outperformers to their portfolios as they strive to design a portfolio of stocks that will fetch them handsome returns.
However, the task is by no means an easy one. This is because the investing world is full of uncertainties and stock prices are sensitive to recent developments. Additionally, the same group of stocks may not work under all circumstances.
For example, airline stocks may benefit from declining oil prices but may fall out of favor in the event of oil prices moving up. One of the well-accepted strategies to brave market uncertainties is to maintain a well-diversified (i.e. include stocks from different industries) portfolio.
Therefore, selecting the right stocks involves thorough research and cannot be done arbitrarily. With time at a premium these days, it is next to impossible for investors to go through the extensive process. Given this backdrop, it is in the best interest of investors to seek guidance from “experts in the field”. The concerned experts are brokers.
Such investment specialists attend conference calls, company presentations and also interact with management. Brokers revise their earnings estimates after carefully examining the pros and cons of an event for the concerned stock. Naturally, their stock related actions (upgrade or downgrade) serve as an invaluable guide as far as fixing the target price of a stock(s) is concerned as they have a lot more information on a company and its prospects than individual investors. In fact, a rating upgrade normally leads to stock price appreciation and vice versa.
The above write-up clearly suggests that by following broker actions, one can arrive at a winning portfolio of stocks. Keeping this in mind, we have designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions to earnings estimates 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 been included. The price/sales ratio takes care of the company’s top line, making the strategy effective.
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 criteria are in the 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:
Verso Corporation is a key player in the paper industry. The company, based in Memphis, United States, focuses on the production of coated freesheet, coated ground wood and uncoated super calendered papers and pulp. Current quarter estimates for this Zacks Rank #2 (Buy) stock have been revised 60% higher over the last seven days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boise Cascade Company (BCC - Free Report) is one of the largest producers of engineered wood products and plywood in North America and a leading wholesale distributor of building products in the United States. The expected earnings per share growth rate for this Zacks Rank #1 company, based in Boise, ID, over the next three-five years stands at a healthy 18.5%.
Beazer Homes USA (BZH - Free Report) is one of the country’s largest single-family homebuilders with a presence in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia. This Zacks Rank #3 company, based in Atlanta, GA, has an impressive earnings track record, having surpassed expectations in three of the last four quarters with an average surprise of 130.5%.
California Resources Corporation (CRC - Free Report) , headquartered in Los Angeles, CA, is an oil and natural gas exploration and production company. Its current-year earnings are expected to grow 39.9%. The stock carries a Zacks Rank #2.
Bristow Group is a leading provider of helicopter services for major transportation operations in the United States, Gulf of Mexico and the North Sea and other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia and Trinidad. The company, based in Houston, TX, has delivered an impressive earnings surprise of 65.3% in the most recent quarter. It has seen its stock price rally in excess of 89% over the last three months. The stock carries a Zacks Rank #3.
Get the remaining stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
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 »