The market appeared relatively calm Tuesday morning with the big banks such as JPMorgan (
JPM Quick Quote JPM - Free Report) set to unofficially kick off third quarter earnings season this week. Wall Street will also be laser-focused on September’s consumer price index data that’s due out Wednesday morning.
Stocks have grinded lower over the last six weeks, with any big drop followed by a quick rebound, as the bulls buy seemingly any significant dip. The S&P 500 currently sits around 4% below its early September records, while the Nasdaq is roughly 5.7% under its peaks and both trade beneath their 50-day moving averages.
Clearly, the market could experience more near term selling and volatility, and many traders and analysts have continued their calls for a correction. Economists and others have lowered their GDP forecasts for the U.S. and beyond amid supply chain disruptions and rising prices across many sectors of the economy.
Despite the economic concerns, the backdrop remains supportive for stocks. The S&P 500 earnings and margins picture for Q3 and beyond remains strong, even with a recent slowdown in positive revisions. Plus, the overall interest rate environment will keep investors chasing returns in equities for the foreseeable future (also read:
What Will Q3 Bank Earnings Show).
Given this backdrop, investors with long-term horizons should remain on the hunt for stocks because timing the market is difficult. Utilizing our Filtered Zacks Rank 5 Stock Screener is a great place to start…
Zacks Rank #1 (Strong Buy) stocks outperform the market in both good and bad times. However, there are over 200 stocks that earn a Zacks Rank #1 at any given time. Therefore, it’s helpful to understand how to apply filters to the Zacks Rank in order to narrow the list down to a more manageable and tradable set of stocks. Parameters
Clearly, there are only three items on this screen. But together, these three filters can result in some impressive returns.
• Zacks Rank equal to 1
Starting with a Zacks Rank #1 is often a strong jumping off point because it boasts an average annual return of roughly 24.4% per year since 1988.
• % Change (Q1) Est. over 4 Weeks greater than 0
Positive current quarter estimate revisions over the last four weeks.
The Zacks Rank looks at earnings estimate revisions for the current year (F1) and the next year (F2). The additional component factors in current quarter (Q1) estimate revisions. The idea is pretty simple.
A company that has experienced downward revisions for the current quarter could soon see longer-term negative revisions. Meanwhile, if a company has earned positive earnings revisions for its current quarter, it might signal that more upward revisions could be coming down the road, which would make it an attractive buy.
• % Broker Rating Change over 4 Week equal to Top # 5
Top 5 stocks with the best average broker rating changes over the last four weeks.
In this screen, we are searching for positive broker rating changes or upgrades over the last four weeks. On top of that, we want to cut down on the number of stocks that come through. So, we configured the screen to select the top 5 stocks with the best broker rating upgrade.
Investors should note that broker ratings typically lean toward the upside. Therefore, our screen makes sure that the brokers are getting more bullish, or at the least not getting less bullish (or even bearish) on the stock.
It is worth noting that the actual broker ratings do not matter as much as the upgrade itself, because stocks with broker rating upgrades have been proven to outperform their counterparts that do not earn positive broker rating changes or downgrades.
This strategy comes loaded with the Research Wizard and is called bt_sow_filtered zacks rank5. It can be found in the SoW (Screen of the Week) folder.
2 of the 5 stocks that qualified for the Filtered Zacks Rank 5 strategy today… Safe Bulkers, Inc ( SB Quick Quote SB - Free Report) Alkermes plc ( ALKS Quick Quote ALKS - Free Report)
See the rest of the stocks on this list and start trading the Filtered Zacks Rank 5 (or any of our other strategies) in your own account. Remember, the key to successful screening is finding screens that have produced profitable results in the past. And that's exactly what you get with the Research Wizard stock picking and backtesting program.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
Click here to sign up for a free trial to the Research Wizard today.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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/