It is a well-known fact that the equity market is not easy to master as it is associated with varying degrees of uncertainties/complexities. Consequently, it is next to impossible for individual investors to design a winning portfolio of stocks without proper guidance.
With a plethora of stocks flooding the market at any given point of time, identifying a solid stock in absence of any expert advice is akin to searching a needle in a haystack for an investor. The right direction in this respect comes from brokers, who are deemed specialists, equipped with vast knowledge on the field of investing.
Brokers attend company conference calls/presentations and scrutinize every detail available publicly before counseling investors about their course of action (buy, sell or hold a stock). They revise a stock’s earnings estimates after carefully examining the pros and cons of an event for the concerned company. Their action is certainly not arbitrary or illogical. Thus, the estimate revisions serve as an important yardstick regarding the price of a stock.
In view of their proficiency and profound understanding of stocks and the vagaries of the investing world, it is a no-brainer that investors should pay heed to brokers’ advice to generate the maximum returns from their portfolios.
The above write-up clearly suggests that by following broker actions, one can arrive at a lucrative portfolio of stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions to earnings estimates over the last four weeks.
Also, since the price/sales ratio is a strong complementary valuation metric, it is included in analyst information. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.
# (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).
We have also added the following screening parameters to ensure that the strategy is a winning one:
Price-to-Sales = Bot%10 (The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio).
Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of 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:
New York-based ABM Industries Incorporated (ABM - Free Report) is a provider of integrated facility solutions in the United States and internationally. Earnings of the company surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 60.5%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Charlotte, NC-based Brighthouse Financial (BHF - Free Report) is one of the largest providers of annuity and life insurance products in the United States. The Zacks Consensus Estimate for 2020 EPS indicates a rise of 204% from the 2019 reported figure. The stock presently carries a Zacks Rank of 3.
Headquartered in Houston, TX, Callon Petroleum Company (CPE - Free Report) is solely focused on exploration, and production of oil and gas resources in the Permian Basin. This presently Zacks #3 Ranked stock has witnessed the Zacks Consensus Estimate for current-year earnings being revised 9.2% upward over the past 60 days.
Domiciled in Columbus, OH, Big Lots (BIG - Free Report) along with its fully-owned subsidiaries is a broad-line closeout retailer in the United States. This curently Zacks Rank #2 (Buy) stock has witnessed the Zacks Consensus Estimate for current-year earnings being revised 10% upward over the past 60 days.
Bed Bath & Beyond (BBBY - Free Report) is a leading operator of specialty retail stores in the United States and Canada. This presently #3 Ranked stock’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters (missing the mark in the other two).
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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