News about the spread of Omicron, the latest variant of coronavirus, dampened investors’ sentiments. Following the detection of this new variant, which was first identified in South Africa, the United States decided to suspend and restrict the entry of foreign nationals into the country. However, the restriction will be applicable only if the passengers were in South Africa, Namibia, Zimbabwe, Botswana, Lesotho, Mozambique, Malawi and Eswatini during a fortnight preceding their entry into the United States. To worsen the situation, the Fed chairman’s comment on the likely acceleration of the bond-buy tapering process dashed market participants’ hopes to a great extent.
However, irrespective of the market conditions, investors strive to design a winning portfolio of stocks. They, after all, are putting their hard-earned money into the stocks. Amid the prevalent confusion, it is almost impossible for individual investors to come up with a promising basket of stocks without proper guidance. Therefore, it is in the best interest of investors to seek advice from the “experts in the field."
Who Are These Experts & Why is Their Advice Important?
The concerned experts are brokers. Brokers have a deeper insight into what’s happening in a particular company along with better understanding of the overall sector and the industry.
To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers follow the stocks under their coverage in great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Estimate revisions serve as an important pointer regarding the price of a stock.
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.
Making the Most of Broker Advice
The above write-up clearly suggests that one can arrive at a winning portfolio of stocks by following broker actions. 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. The price/sales ratio takes care of the company’s top line, making the strategy a winning one.
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 eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
ArcBest Corporation ( ARCB Quick Quote ARCB - Free Report) sports a Zacks Rank #1 (Strong Buy), currently. ARCB has a stellar surprise history, earnings of which outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 27.4%.
Shares of ArcBest have rallied more than 100% so far this year. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting growth at ARCB. You can see
the complete list of today’s Zacks #1 Rank stocks here. Atlas Air Worldwide Holdings ( AAWW Quick Quote AAWW - Free Report) is the parent company of Atlas Air and Polar Air Cargo, which together operate a fleet of freighter aircraft. AAWW is primarily involved in the airport-to-airport air transportation of heavy freight. AAWW is being supported by strong demand for air freight amid the coronavirus pandemic. The boom in e-commerce trends amid the current scenario is a catalyst.
Over the past 60 days, this presently Zacks #1 Ranked player has seen the Zacks Consensus Estimate for 2021 earnings being revised 15.5% upward. The stock has appreciated 56.7% so far this year.
Caleres ( CAL Quick Quote CAL - Free Report) : This Saint Louis-based company, currently flaunting a Zacks Rank of 1, engages in the retail and wholesale of footwear. Strong performance of its Famous Footwear and Brand Portfolio segments is driving the top line.
Caleres has an excellent track record considering its earnings per share. The bottom line outshined the Zacks Consensus Estimate in each of the last four quarters, the average being in excess of 100%. Shares of CAL have soared above 43% so far this year.
Arch Resources ( ARCH Quick Quote ARCH - Free Report) , based in St. Louis, MO, is one of the largest coal producers in the United States. The stock, presently sporting a Zacks Rank #1, has seen the Zacks Consensus Estimate for current-year earnings move 41.9% north over the past 60 days.
Factors like its strong liquidity position bode well for Arch Resources. ARCH recently commenced longwall production at the Leer South mine, which will add high-quality 3 million tons of metallurgical coal annually to its total production. The ongoing rebound in production in the steel industry will create fresh demand for met coal supplied by ARCH.
Peabody Energy ( BTU Quick Quote BTU - Free Report) : St Louis, MO-based Peabody Energy engages in the coal-mining business and has both thermal and metallurgical operations to manage. The stock that has skyrocketed more than 100% year to date has seen the Zacks Consensus Estimate for current-year earnings move 41.9% north over the past 60 days.
Revival in the domestic and international coal markets augurs well for Peabody Energy. BTU outperformed on earnings in two of the last four quarters, lagging estimates in the other two. BTU currently carries a Zacks Rank #2 (Buy).
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 backtest 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 .