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Use Relative Price Strength to Survive the Market Turmoil
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Wall Street experienced increased volatility last week amid Russia’s launch of military operations in Ukraine. The uncertainty imposed by Kremlin’s aggression also saw the price of oil briefly rise above $100 a barrel on Thursday for the first time since 2014. While the conflict is ongoing, the S&P 500 recouped some of its losses on Friday on reports that Moscow is prepared to hold talks with Ukrainian leadership.
Nevertheless, the ratcheted-up geopolitical tensions have sent tremors through the stock market. As it is, with the central bank likely to raise the interest rate to combat soaring inflation, the market is set up for more future uncertainty.
For investors who might want to stay exposed to the market even during turmoil, it is time to focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential for determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Here are five of the 25 stocks that made it through the screen:
ConocoPhillips (COP - Free Report) : This Houston, TX-based firm is one of the world’s largest independent oil and gas producers. ConocoPhillips has a VGM Score of A.
For 2022, COP has a projected earnings growth rate of 62.1%. Valued at around $118.6 billion, ConocoPhillips shares have gained around 78.7% in a year.
Tyson Foods, Inc. (TSN - Free Report) : The company produces, distributes and markets chicken, beef, pork as well as prepared foods. Tyson Foods has a VGM Score of A. Over the past 30 days, Springdale, AR-based Tyson Foods saw the Zacks Consensus Estimate for fiscal 2022 move up 18.5%.
Tyson Foods beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 32.2%. Valued at around $34 billion, TSN has gained some 38.6% in a year.
AMN Healthcare Services, Inc. (AMN - Free Report) : AMN Healthcare is a leading provider of staffing and workforce management solutions in the medical field. The 2022 Zacks Consensus Estimate for this Dallas, TX-based firm indicates 15.2% year-over-year earnings per share growth. AMN has a VGM Score of B.
AMN Healthcare beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 20%, on average. AMN shares have rallied around 42.8% in a year.
WESCO International, Inc. (WCC - Free Report) : Founded in 1922 and headquartered in Pittsburgh, PA, WESCO International is one of the largest players in the highly fragmented distribution market for electrical construction products in North America. WCC has a VGM Score of A.
Notably, WESCO International beat the Zacks Consensus Estimate for earnings in each of the last four quarters. WCC has a trailing four-quarter earnings surprise of roughly 38.7%, on average. The company’s shares have increased around 44.1% in a year.
Capri Holdings Limited (CPRI - Free Report) : Capri Holdings provides women’s and men’s accessories, footwear and ready-to-wear, as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products. The company’s expected EPS growth rate for three to five years is currently 30.9%, which compares favorably with the industry's growth rate of 21.3%. CPRI has a VGM Score of B.
Notably, Capri Holdings beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 1,018.2%, on average. CPRI shares have gained around 42.9% in a 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.
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.
Image: Bigstock
Use Relative Price Strength to Survive the Market Turmoil
Wall Street experienced increased volatility last week amid Russia’s launch of military operations in Ukraine. The uncertainty imposed by Kremlin’s aggression also saw the price of oil briefly rise above $100 a barrel on Thursday for the first time since 2014. While the conflict is ongoing, the S&P 500 recouped some of its losses on Friday on reports that Moscow is prepared to hold talks with Ukrainian leadership.
Nevertheless, the ratcheted-up geopolitical tensions have sent tremors through the stock market. As it is, with the central bank likely to raise the interest rate to combat soaring inflation, the market is set up for more future uncertainty.
For investors who might want to stay exposed to the market even during turmoil, it is time to focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential for determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Here are five of the 25 stocks that made it through the screen:
ConocoPhillips (COP - Free Report) : This Houston, TX-based firm is one of the world’s largest independent oil and gas producers. ConocoPhillips has a VGM Score of A.
For 2022, COP has a projected earnings growth rate of 62.1%. Valued at around $118.6 billion, ConocoPhillips shares have gained around 78.7% in a year.
Tyson Foods, Inc. (TSN - Free Report) : The company produces, distributes and markets chicken, beef, pork as well as prepared foods. Tyson Foods has a VGM Score of A. Over the past 30 days, Springdale, AR-based Tyson Foods saw the Zacks Consensus Estimate for fiscal 2022 move up 18.5%.
Tyson Foods beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 32.2%. Valued at around $34 billion, TSN has gained some 38.6% in a year.
AMN Healthcare Services, Inc. (AMN - Free Report) : AMN Healthcare is a leading provider of staffing and workforce management solutions in the medical field. The 2022 Zacks Consensus Estimate for this Dallas, TX-based firm indicates 15.2% year-over-year earnings per share growth. AMN has a VGM Score of B.
AMN Healthcare beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 20%, on average. AMN shares have rallied around 42.8% in a year.
WESCO International, Inc. (WCC - Free Report) : Founded in 1922 and headquartered in Pittsburgh, PA, WESCO International is one of the largest players in the highly fragmented distribution market for electrical construction products in North America. WCC has a VGM Score of A.
Notably, WESCO International beat the Zacks Consensus Estimate for earnings in each of the last four quarters. WCC has a trailing four-quarter earnings surprise of roughly 38.7%, on average. The company’s shares have increased around 44.1% in a year.
Capri Holdings Limited (CPRI - Free Report) : Capri Holdings provides women’s and men’s accessories, footwear and ready-to-wear, as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products. The company’s expected EPS growth rate for three to five years is currently 30.9%, which compares favorably with the industry's growth rate of 21.3%. CPRI has a VGM Score of B.
Notably, Capri Holdings beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 1,018.2%, on average. CPRI shares have gained around 42.9% in a 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.