Irrespective of the surrounding conditions, investors strive to design a basket of stocks that will fetch them handsome returns. However, the task is easier said than done. This is because the investing world is fraught with uncertainties and stock prices are sensitive to recent developments. Moreover, with a deluge of stocks flooding the market at any given point of time, the task of choosing the right stock is anything but simple.
This clearly suggests that one needs to have in-depth knowledge of the minute details of the investing space. This is quite impossible for individual investors. Consequently, advice of “experts” in this field is much sought after by investors.
Broker Advice: An Invaluable Guide
The experts in the field of investing are brokers. Brokers scrutinize the publicly available financial documents, and also attend company conference calls and other presentations. Since brokers recommend (buy, sell or hold) a stock after thoroughly analyzing the nitty-gritties associated with the company, it is then perfect for investors to be guided by their direction of estimate revisions while deciding their course of action on a particular stock. The estimate revisions serve as an important pointer regarding the price of a stock. In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
Estimates can move north for a number of reasons, including a favorable earnings performance, a bullish guidance, product launch or an optimistic macro scenario. 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.
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 taken into consideration. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.
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 takes out the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
Berry Global Group ( BERY Quick Quote BERY - Free Report) manufactures and distributes non-woven specialty materials, engineered materials and consumer packaging products in the market. BERY is poised to gain from strength in its food & beverage and healthcare end markets along with recovery in the construction space in the quarters ahead.
Berry Global’s bottom line outshined the Zacks Consensus Estimate in each of the last four quarters, the average being 16.5%. Shares of BERY have gained 37.5% over the past year. BERY currently flaunts a Zacks Rank #1 (Strong Buy). You can see
. the complete list of today’s Zacks #1 Rank stocks here ArcBest Corporation ( ARCB Quick Quote ARCB - Free Report) currently carries a Zacks Rank #2 (Buy). ARCB’s earnings trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average being 27.4%. The Zacks Consensus Estimate for ARCB’s 2022 earnings has been revised 3.51% upward in the past 60 days.
Shares of ArcBest have skyrocketed 85.1% in a year’s time. Improving freight conditions in the United States bode well for ARCB. Solid customer demand and higher market rates are supporting ARCB.
Caleres ( CAL Quick Quote CAL - Free Report) : This Saint Louis-based company, currently carrying a Zacks Rank of 2, 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 35.7% over the past year.
C.H. Robinson Worldwide ( CHRW Quick Quote CHRW - Free Report) , currently carrying a Zacks Rank #3 (Hold), operates as an asset-light logistics player. The improving freight scenario in the United States is aiding this Minnesota-based freight broker. Efforts to control costs also bode well. Measures to reward CHRW’s shareholders instill further confidence in the stock.
C.H. Robinson has an impressive earnings track record. The bottom line surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22%. CHRW has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 2.81% upward over the past 60 days.
Archer Daniels ( ADM Quick Quote ADM - Free Report) : This Chicago, IL-based leading agricultural products player’s leadership in key global trends like flexitarian diets, nutrition and sustainable materials is a contributor to its momentum. ADM’s focus on making investments in assets and technological capabilities to serve customers efficiently is likely to be a key driver.
Archer Daniels’ Readiness program, positive cash flow and a solid performance at the Nutrition unit are aiding results. ADM has been progressing well on its three strategic pillars, which are optimize, drive and growth for a while. The Zacks Consensus Estimate for 2022 earnings has been revised 3.3% upward over the past 60 days. Shares of ADM have soared 33.2% over the past year.
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 .