It is a well-established fact that the stock market is not an easy place to dabble in and one needs thorough knowledge to rake in moolah. This is where some guidance comes in handy. To get proper assistance, investors often fall back on expert advice while arriving at a concrete investment decision (buy, sell or hold). The exponents in the field of investing are brokers as they have at their disposal a lot more information on a company and its prospects than an individual investor.
Brokers, irrespective of their types (sell-side, buy-side or independent), undertake a thorough research of the stocks covered by them. They go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Therefore, the opinion of brokers can act as a valuable handbook for investors.
Since brokers indulge in in-depth research, their actions can never be put to question or dubbed arbitrary. Estimate revisions also serve as an important pointer regarding the price of a stock. In fact, an increase in estimates normally leads to stock price appreciation and vice versa.
One of the well-accepted investment strategies is to maintain a diversified portfolio to generate handsome returns, irrespective of the market conditions. For instance, in the face of extremely low oil prices, analysts adopt a bullish stance on airline stocks and eventually raise estimates. Naturally, adding such stocks to one’s portfolio in such a scenario might prove to be a winning strategy.
Making the Most of Broker Opinions
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 in 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 is also included as an important parameter. 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 the top 75 companies that have witnessed net upgrades over the last four 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 four 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 criterion 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:
Atlas Air Worldwide Holdings ( AAWW Quick Quote AAWW - Free Report) is a provider of outsourced aircraft and aviation operating services. The stock presently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for current-year earnings has improved 49.6% over the past 60 days. Caleres ( CAL Quick Quote CAL - Free Report) engages in the retail and wholesale of footwear. This Saint Louis, MO-based company’s earnings for fiscal 2022 are projected to soar 246.4% from its fiscal 2021 actuals. The stock, currently sporting a Zacks Rank #1 (Strong Buy), has witnessed 17% upward revision in current-quarter earnings over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here .
Amerisource Bergen ( ABC Quick Quote ABC - Free Report) is one of the world’s largest pharmaceutical services companies, which focuses on providing drug distribution and related services to reduce health care costs and improve patient outcomes.The stock presently carries a Zacks Rank of 3. Earnings of the company outshined the Zacks Consensus Estimate in each of the last four quarters, the average being 7.8%. Chico's FAS ( CHS Quick Quote CHS - Free Report) operates as an omnichannel specialty retailer of women's accessories. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 46.9% north over the past 60 days. Builders FirstSource ( BLDR Quick Quote BLDR - Free Report) : Based in Dallas, TX, the company supplies and manufactures a range of building materials and components as well as provides construction services. The stock, carrying a Zacks Rank #3 at present, has seen the Zacks Consensus Estimate for 2021 earnings being revised 29.8% upward in 60 days’ time.
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: h ttps://www.zacks.com/performance .