Back to top

Image: Bigstock

Tap 5 Broker-Friendly Bets to Navigate Choppy Markets

Read MoreHide Full Article

The U.S. stock markets have been reeling under severe volatility since the commencement of 2022. The aggressive stance adopted by the Federal Reserve to tame the unprecedented inflation (interest rates already saw a hike of 25 basis points with six more intended this year) coupled with geopolitical conflict between Russia and Ukraine dented investors’ confidence.

Given this highly volatile scenario, it is extremely difficult for individual investors to design a winning portfolio of stocks. However, no investor wants to see this hard-earned money invested in the highly unpredictable stock market, go down the drain. He/she will always look for attractive returns, irrespective of the market conditions.  So what is the way forward?  Adhering to broker advice is surely one of the most trusted ways to select winning stocks. Investors may consider adding stocks, such as Cross Country Healthcare (CCRN - Free Report) , Builders FirstSource (BLDR - Free Report) , Build-A-Bear Workshop (BBW - Free Report) , Casey's General Stores (CASY - Free Report) and CNO Financial Group (CNO - Free Report) to their portfolio.

Why Broker Advice is the Need of the Hour

Brokers go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers follow the stocks in 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 are an important determinant of the stock price.

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.

Do Not Ignore the Top Line

However, designing a strategy based solely on the bottom line is unlikely to result in a winning approach. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness. To address the 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).

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 (as a stock trading below $5 will not likely create significant interest for most of the 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 in terms of 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:

Cross Country Healthcare is currently benefiting from the pandemic-induced increase in demand for healthcare staffing, investments in headcount and technology, and higher operational effectiveness. Digital transformation and operational efficiency are enabling CCRN to cater to continuously rising demand in specialties, such as emergency room, operating room, labor, pediatrics, and delivery and medical-surgical services.

The Zacks Consensus Estimate for Cross Country Healthcare’s 2022 earnings has been revised 110.6% upward in the past 60 days. Shares of CCRN have increased 88.4% in a year’s time.  CCRN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Builders FirstSource, based in Dallas, TX, manufactures and supplies building materials. BLDR has been benefiting from its focus on cost-management practices, strategic acquisitions and robust demand, driven by solid housing, and repair and remodeling activities.

Builders FirstSource continues to focus on investing in innovations and enhancing digital solutions for its customers. BLDR currently sports a Zacks Rank of 1. The stock has surged 80% in a year. The Zacks Consensus Estimate for BLDR’s current-year sales indicates growth of 2.4% from the year-ago reported figure.

Casey's General Stores is one of the leading convenience store retailers in the United States with a strong brick-and-mortar footprint. The acquisition of Buchanan Energy, completed last year, is an added positive as it supplemented 94 retail stores and 79 dealer locations to CASY's business. CASY’s self-distribution model and strength in Prepared Food business also bode well.

Casey’s currently carries a Zacks Rank #2 (Buy). Shares of CASY have gained 4.7% in a month’s time. The Zacks Consensus Estimate for CASY’s current fiscal-year earnings has been revised 4.25% upward over the past 60 days.

Build-A-Bear sells teddy bears and other stuffed animals and characters. Customers go through an interactive process in which the stuffed animal of their choice is assembled and tailored to their preferences during their visit to the store.

The stock price of BBW has advanced 5.4% over the past three months. Build-A-Bear, currently carrying a Zacks Rank of 2, has an expected earnings growth rate of 9.79% for the current fiscal year. The Zacks Consensus Estimate for current- fiscal-year earnings has improved 1.56% over the past 60 days.

CNO Financial is being aided by factors like better pricing, exposure growth, solid retention, favorable renewals, reinsurance agreements, product redesign and accelerated digitalization. CNO’s efforts to control costs are commendable, which in turn, are supporting its bottom line.

CNO Financial is currently Zacks #2 Ranked. The Zacks Consensus Estimate for CNO’s current-year earnings has improved 3% over the past 60 days. CNO’s shares have gained 4.5% over the past three months.

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.