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5 Stocks With Recent Price Strength to Enhance Your Returns

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Wall Street is enjoying a dream run for nearly five months. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied significantly in the last four months. Wall Street historically remains muted in August. But this year, markets are continuing their northbound journey, defying coronavirus-led woes.

Then again, the market is yet to fully recover year to date from the pandemic-led devastations. The Nasdaq Composite is flying high and the S&P 500 recently recorded a fresh all-time high erasing coronavirus-induced losses. However, the Dow is still in negative territory and way behind its all-time high recorded on Feb 12.

The market's worst appears behind us as negative estimates are already factored in valuations. Although coronavirus-induced woes are persisting in the United States, causing occasional market fluctuations, the overall movement of Wall Street is likely to remain northbound.

Meanwhile, second-quarter 2020 earnings results have not come in as bad as expected at the start of the reporting cycle. Moreover, systematic reopening of the U.S. economy after nearly two months of lockdowns helped in reviving aggregate demand.

This is evident from a series of better-than-expected economic data from April to August. Although second-quarter U.S. GDP plunged 32.9%, it was better than the consensus estimate of a 34.7% decline.

At this stage, wouldn’t it be a safer strategy to look for stocks that are winners and have the potential to gain further?

Sounds Good? Here’s How to Execute It:

One should primarily target stocks that have freshly been on a bull run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously witnessing an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.

However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Just these few criteria have narrowed down the search from over 7,700 stocks to just seven.

Here we present five out of those seven stocks:

Sirius International Insurance Group Ltd. (SGC - Free Report) manufactures and sells a wide range of uniforms, corporate ID, career apparel and accessories for the hospital and healthcare fields, hotels, fast food and other restaurants, and public safety, industrial, transportation and commercial markets.

The stock price has jumped 34.8% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved more than 100% over the last 30 days.

Mr. Cooper Group Inc. (COOP - Free Report) provides quality servicing, origination and transaction-based services principally to single-family residences in the United States. Its brand consists of Mr. Cooper and Xome.

The stock price has climbed 27.3% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved  85.3% over the last 30 days.

Daqo New Energy Corp. (DQ - Free Report) manufactures and sells polysilicon to photovoltaic product manufactures in China. It offers ready-to-use and packaged polysilicon to meet crucible stacking, pulling and solidification products.

The stock price has rallied 22.7% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 22.9% over the last 7 days.

Azure Power Global Ltd. (AZRE - Free Report) is engaged in the development, construction, ownership, operation, maintenance, and management of solar power plants in India. It generates solar energy based on long-term contracts with state-run energy distribution companies, and other non-governmental energy distribution companies and commercial customers.

The stock price has appreciated 14.3% in the past four weeks. The company has expected earnings growth of 21.3% for the current year (ending March 2021). The Zacks Consensus Estimate for the current year has improved by 38.3% over the last 30 days.

Griffon Corp. (GFF - Free Report) is a diversified management and holding company conducting business through wholly-owned subsidiaries. It oversees the operations of its subsidiaries, allocates resources among them and manages their capital structures.  

The stock has surged 12.4% in the past four weeks. The company has expected earnings growth of 40.7% for the current year (ending September 2020). The Zacks Consensus Estimate for the current year has improved  40.7% over the last 30 days.

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.