The emergence and the subsequent spread of the Delta variant of coronavirus saw the number of cases and hospitalizations rise sharply again in the United States. Places like Texas are the worst hit by the rapid spread of this more contagious strain of COVID-19. Naturally, this renewed surge in infection fueled fears that the economic recovery might be derailed. Evidently, retail sales in the United States dipped 1.1% in July, which is much worse than analysts’ expectations.
This highly transmittable strain not only spread in the United States, other countries like China are also reeling under the relapse of coronavirus cases. Added to the Delta-variant scare, there are other woes as well like the Taliban-induced tensions in Afghanistan.
Naturally, the headwinds are keeping investors on the edge. In this highly uncertain scenario, it is next to impossible for individual investors to design a winning portfolio of stocks without proper guidance.Given this backdrop, it is in the best interest of investors to seek guidance from “experts in the field."
Who Are the Experts & Why?
The “experts” in the field of investing are brokers who are equipped with thorough knowledge about the space. Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its prospects than individual investors.
To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Broker opinion should thus act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. The estimate revisions serve as an important pointer regarding the price of a stock.
To take care of the earnings performance, we designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
Consider the Top Line Too
However, designing a strategy based solely on the bottom line is unlikely to result in a winning strategy. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. To address top-line concerns, we included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
Screening Criteria # (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.
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 criteria are in 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 eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
Macy's ( M Quick Quote M - Free Report) currently sports a Zacks Rank #1 (Strong Buy) and is benefiting from its emphasis on the Polaris Strategy, which focuses on strengthening customer relationships, expanding assortments, accelerating digital growth, optimizing store portfolio and reducing costs. Strong digital sales are supporting growth of this retailer. During first-quarter fiscal 2021, the company’s digital sales came in at $1.7 billion that rallied 34% from the year-ago quarter’s figure and contributed 37% to net sales. The company’s earnings outshined the Zacks Consensus Estimate in each of the last four quarters in excess of 100%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here .
CONSOL Energy ( CEIX Quick Quote CEIX - Free Report) with a Zacks Rank #3 (Hold) at present, produces and exports bituminous thermal coal. The company owns and operates the Pennsylvania Mining Complex and the Baltimore Marine Terminal, and controls more than 1 billion tons of undeveloped reserves. The company’s free cash flow generating ability bodes well. The stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised upward to the tune of 74.36% over the past 60 days. Cross Country Healthcare ( CCRN Quick Quote CCRN - Free Report) is a national leader in providing innovative healthcare workforce solutions and staffing services. The company’s diverse client base bodes well. The stock, currently carrying a Zacks Rank #2 (Buy), has seen the Zacks Consensus Estimate for current-quarter earnings being revised 70% upward over the past 60 days. Bloomin Brands ( BLMN Quick Quote BLMN - Free Report) is a casual dining restaurant company with a portfolio of differentiated restaurant concepts. The company currently has a Zacks Rank of 3. The Zacks Consensus Estimate for current-quarter earnings has moved 90% north over the past 60 days. The company is being aided by the fact that the restaurant industry seems to be gradually getting back on its feet with a rebound in sales as more and more people are dining out owing to large-scale vaccination and improving economic conditions. Builders FirstSource ( BLDR Quick Quote BLDR - Free Report) , currently carrying a Zacks Rank #3, is benefiting from robust demand for single-family housing, focus on digital platform, cost-management actions and other factors. The company’s bottom line outpaced the Zacks Consensus Estimate in each all the last four quarters by 49.67%, on average.
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. 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 .