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Finding 'Strong Buy' Stocks as Interest Rate and Inflation Worries Return
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Wall Street continued selling stocks to start the holiday-shortened trading week. The Nasdaq was down 2% through early afternoon trading on Tuesday, while the S&P 500 and the Dow had both dropped 1.6%. The heavy selling extends a recent pessimistic streak as investors are forced once again recalibrate their outlooks for inflation and the Fed’s interest rate policy.
The bullish start to 2023 was based, in part, on the idea that inflation was cooling rather rapidly and the Fed would be able to stop raising rates in short order. The wave of hot economic data across nearly every area of the economy threw a rather large wrench in that line of thinking, at least for now.
Wall Street has been forced to temper their expectations on the Fed’s near-term rate policy, with investors boosting their outlooks for the peak fed funds rate. Investors also sent the 2-year U.S. Treasury yield up even higher on Tuesday morning to 4.71% vs. its recent lows of 4.10% on February 1. The short-term yield is now approaching its early November highs of 4.75%.
Some selling did seem due given the massive run to start the year. Still, the recalibrated inflation outlook might mean investors want to stay away from some of the high-growth names in favor of stocks that have proven they can improve their earnings outlooks amid the wider EPS downturn from the S&P 500.
With this in mind, investors can utilize the Filtered Zacks Rank 5 Stock Screen to help find potentially winning stocks for the end of February, March, and beyond that have all been able to boost their earnings guidance even as the economic and stock market picture become a bit murkier again.
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.
• % 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.
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.
Here are two of the five stocks that qualified for the Filtered Zacks Rank 5 strategy today…
Belden Inc. is a global supplier of network infrastructure solutions. Belden’s offerings include fiber optic and flex cables, coaxial connectors, and much more, all of which serve nearly any industry and market imaginable in our connected world.
Belden posted 29% revenue growth in 2021 and another 8% in 2022 to help boost its adjusted earnings by 35% in FY22. Belden topped Zacks adjusted Q4 EPS estimate on February 8 and provided upbeat guidance to help it land that Zacks Rank #1 (Strong Buy).
Zacks estimates call for Belden to post 3.4% revenue growth in 2023 and another 5.6% in FY24 to boost its adjusted earnings by 7% and 6%, respectively. Belden’s Wire and Cable Products industry is in the top 1% of over 250 Zacks industries right now.
Belden shares have climbed 23% YTD to crush the market and its Zacks Industrial Products Sector. The recent surge is part of a 100% climb during the past two years. Despite the run, BDC stock still trades 18% below its average Zacks price target. Plus, Wall Street is rather higher on Belden, with four of the six brokerage recommendations Zacks has coming in at “Strong Buys.”
O-I Glass, Inc. is one of the top producers of glass bottles and jars in the U.S. and around the world. O-I Glass works with some of the leading food and beverage brands on the planet. The firm’s offerings are likely to remain highly popular as companies and customers look to be as environmentally and recycling friendly as possible.
O-I Glass is in the midst of trying to revamp some of its business operations to help unlock shareholder value over the next several years. The glass bottles and jar giant hopes its efforts help it return “to profitable growth, capitalize on opportunities, reduce structural costs,” and much more. O-I Glass revenue climbed 8% last year and it topped our Q4 EPS estimates by 19% at the end of January.
Zacks estimates call for O-I Glass to post 5.5% higher revenue in 2023 and 12% stronger adjusted earnings. The company’s updated earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now. O-I Glass shares have jumped 31% in 2023 and 67% in the last two years to blow away its Zacks sector and its industry. Wall Street is high on the stock and its Glass Products space ranks in the top 8% of over 250 Zacks industries.
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.
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.
Image: Bigstock
Finding 'Strong Buy' Stocks as Interest Rate and Inflation Worries Return
Wall Street continued selling stocks to start the holiday-shortened trading week. The Nasdaq was down 2% through early afternoon trading on Tuesday, while the S&P 500 and the Dow had both dropped 1.6%. The heavy selling extends a recent pessimistic streak as investors are forced once again recalibrate their outlooks for inflation and the Fed’s interest rate policy.
The bullish start to 2023 was based, in part, on the idea that inflation was cooling rather rapidly and the Fed would be able to stop raising rates in short order. The wave of hot economic data across nearly every area of the economy threw a rather large wrench in that line of thinking, at least for now.
Wall Street has been forced to temper their expectations on the Fed’s near-term rate policy, with investors boosting their outlooks for the peak fed funds rate. Investors also sent the 2-year U.S. Treasury yield up even higher on Tuesday morning to 4.71% vs. its recent lows of 4.10% on February 1. The short-term yield is now approaching its early November highs of 4.75%.
Some selling did seem due given the massive run to start the year. Still, the recalibrated inflation outlook might mean investors want to stay away from some of the high-growth names in favor of stocks that have proven they can improve their earnings outlooks amid the wider EPS downturn from the S&P 500.
With this in mind, investors can utilize the Filtered Zacks Rank 5 Stock Screen to help find potentially winning stocks for the end of February, March, and beyond that have all been able to boost their earnings guidance even as the economic and stock market picture become a bit murkier again.
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.
• % 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.
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.
Here are two of the five stocks that qualified for the Filtered Zacks Rank 5 strategy today…
Belden Inc. ((BDC - Free Report) )
Belden Inc. is a global supplier of network infrastructure solutions. Belden’s offerings include fiber optic and flex cables, coaxial connectors, and much more, all of which serve nearly any industry and market imaginable in our connected world.
Belden posted 29% revenue growth in 2021 and another 8% in 2022 to help boost its adjusted earnings by 35% in FY22. Belden topped Zacks adjusted Q4 EPS estimate on February 8 and provided upbeat guidance to help it land that Zacks Rank #1 (Strong Buy).
Zacks estimates call for Belden to post 3.4% revenue growth in 2023 and another 5.6% in FY24 to boost its adjusted earnings by 7% and 6%, respectively. Belden’s Wire and Cable Products industry is in the top 1% of over 250 Zacks industries right now.
Belden shares have climbed 23% YTD to crush the market and its Zacks Industrial Products Sector. The recent surge is part of a 100% climb during the past two years. Despite the run, BDC stock still trades 18% below its average Zacks price target. Plus, Wall Street is rather higher on Belden, with four of the six brokerage recommendations Zacks has coming in at “Strong Buys.”
O-I Glass, Inc. ((OI - Free Report) )
O-I Glass, Inc. is one of the top producers of glass bottles and jars in the U.S. and around the world. O-I Glass works with some of the leading food and beverage brands on the planet. The firm’s offerings are likely to remain highly popular as companies and customers look to be as environmentally and recycling friendly as possible.
O-I Glass is in the midst of trying to revamp some of its business operations to help unlock shareholder value over the next several years. The glass bottles and jar giant hopes its efforts help it return “to profitable growth, capitalize on opportunities, reduce structural costs,” and much more. O-I Glass revenue climbed 8% last year and it topped our Q4 EPS estimates by 19% at the end of January.
Zacks estimates call for O-I Glass to post 5.5% higher revenue in 2023 and 12% stronger adjusted earnings. The company’s updated earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now. O-I Glass shares have jumped 31% in 2023 and 67% in the last two years to blow away its Zacks sector and its industry. Wall Street is high on the stock and its Glass Products space ranks in the top 8% of over 250 Zacks industries.
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/