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5 Stocks With Recent Price Strength Amid a Hawkish Fed
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Wall Street is reeling under severe volatility in 2022. The primary reason for market fluctuation is mounting inflation, which is currently at its 40-year high and a tougher-than-expected Fed to combat inflation.
In its latest FOMC meeting in March, the central bank hiked the benchmark interest rate by 25 basis points for the first time in more than three years. Moreover, Fed chairman Jerome Powell has already indicated that the central bank will not hesitate to take harsher measures if it fails to contain inflation.
On Apr 6, the Fed released the minutes of its March FOMC. Fed officials almost unanimously agreed that the central bank must reduce the size of its nearly $9 trillion balance sheet by around $95 per month starting from May.
A maximum of $60 billion in Treasury Notes and $35 billion in mortgage-backed securities would be allowed to roll off for three months. Notably, the Fed terminated its $120 billion per month bond-buy program in March. The quantitative easing program was introduced by the central bank as a monetary stimulus to combat the pandemic.
Moreover, the minutes revealed that most officials have agreed that the Fed must raise the interest rate by 50 basis points in the next two FOMC’s in May and June. The Fed was set to raise the interest rate by 50 basis points in March. However, the uncertainty related to the war between Russia and Ukraine led the Fed to contain the rate hike at just 25 basis points.
A handful of stocks have shown price strength recently. Five of them are — Bancolombia S.A. (CIB - Free Report) , Lantheus Holdings Inc. (LNTH - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) , PDC Energy Inc. and Allegheny Technologies Inc. (ATI - Free Report) .
Here’s How We Arrived at the Picks
We have primarily targeted stocks that have freshly been on a bull run. Stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously witnessing an uptrend, there must be a solid reason or it would have probably crashed. So, looking at stocks capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create magic. Therefore, other relevant parameters are needed to create a successful investment strategy.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
Screening Parameters:
Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.
Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Just these few criteria narrowed down the search from over 7,700 stocks to just eight.
Let’s discuss our five picks out of the eight stocks:
Bancolombia provides various banking products and services to individual and corporate customers in Colombia, Panama, Puerto Rico, El Salvador, Costa Rica, and Guatemala. CIB operates through nine segments: Banking Colombia, Banking Panama, Banking El Salvador, Banking Guatemala, Trust, Investment Banking, Brokerage, International Banking, and All Other.
The stock price of Bancolombia has surged 14% in the past four weeks. CIB has an expected earnings growth rate of 20.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.2% over the last 30 days.
Lantheus Holdings is involved in developing, manufacturing, selling and distributing diagnostic medical imaging agents and products for the diagnosis of cardiovascular and other diseases. LNTH serves to hospitals, clinics, group practices, integrated delivery networks, group purchasing organizations, radiopharmacies and wholesalers.
The stock price of Lantheus Holdings has appreciated 12.9% in the past four weeks. LNTH has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1% over the last 30 days.
Arcos Dorados operates as a franchisee of McDonald's with its operations divided in Brazil, North Latin America division, South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.
The stock price of Arcos Dorados has advanced 8.6% in the past four weeks. ARCO has an expected earnings growth rate of 62.5% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.4% over the last 30 days.
PDC Energy is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids in the United States. The SRC Energy deal in 2020 has made PDCE the second-largest oil producer in the DJ Basin to go with its existing Delaware acreage.
PDC Energy has a favorable debt maturity profile with little in near-term due, while a disciplined approach to capital spending together with surging oil and natural gas prices should boost cumulative free cash flow generation to $2.7 billion in 2022 and 2023.
The stock price of PDC Energy has gained 8.1% in the past four weeks. PDCE has an expected earnings growth rate of 82.7% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.1% over the last 7 days.
Allegheny Technologies is a diversified specialty materials producer. ATI is likely to benefit from strength in the high-performance Materials & Components segment and demand growth in the Forgings business. Higher selling prices and increased market demand are also driving results in the Advanced Alloys & Solutions unit.
Allegheny Technologies is also focused on improving the cost structure. The company has efficiently managed capital expenditure, by adjusting its capital spending to meet the new demand levels. ATI is in the process of finishing several self-funded capital projects. ATI’s exit from low-margin standard stainless sheet products is also expected to drive margins in its Advanced Alloys & Solutions segment.
The stock price of Allegheny Technologies has risen 6.6% in the past four weeks. ATI has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3% over the last 7 days.
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 to day. 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
5 Stocks With Recent Price Strength Amid a Hawkish Fed
Wall Street is reeling under severe volatility in 2022. The primary reason for market fluctuation is mounting inflation, which is currently at its 40-year high and a tougher-than-expected Fed to combat inflation.
In its latest FOMC meeting in March, the central bank hiked the benchmark interest rate by 25 basis points for the first time in more than three years. Moreover, Fed chairman Jerome Powell has already indicated that the central bank will not hesitate to take harsher measures if it fails to contain inflation.
On Apr 6, the Fed released the minutes of its March FOMC. Fed officials almost unanimously agreed that the central bank must reduce the size of its nearly $9 trillion balance sheet by around $95 per month starting from May.
A maximum of $60 billion in Treasury Notes and $35 billion in mortgage-backed securities would be allowed to roll off for three months. Notably, the Fed terminated its $120 billion per month bond-buy program in March. The quantitative easing program was introduced by the central bank as a monetary stimulus to combat the pandemic.
Moreover, the minutes revealed that most officials have agreed that the Fed must raise the interest rate by 50 basis points in the next two FOMC’s in May and June. The Fed was set to raise the interest rate by 50 basis points in March. However, the uncertainty related to the war between Russia and Ukraine led the Fed to contain the rate hike at just 25 basis points.
A handful of stocks have shown price strength recently. Five of them are — Bancolombia S.A. (CIB - Free Report) , Lantheus Holdings Inc. (LNTH - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) , PDC Energy Inc. and Allegheny Technologies Inc. (ATI - Free Report) .
Here’s How We Arrived at the Picks
We have primarily targeted stocks that have freshly been on a bull run. Stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously witnessing an uptrend, there must be a solid reason or it would have probably crashed. So, looking at stocks capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create magic. Therefore, other relevant parameters are needed to create a successful investment strategy.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
Screening Parameters:
Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.
Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Just these few criteria narrowed down the search from over 7,700 stocks to just eight.
Let’s discuss our five picks out of the eight stocks:
Bancolombia provides various banking products and services to individual and corporate customers in Colombia, Panama, Puerto Rico, El Salvador, Costa Rica, and Guatemala. CIB operates through nine segments: Banking Colombia, Banking Panama, Banking El Salvador, Banking Guatemala, Trust, Investment Banking, Brokerage, International Banking, and All Other.
The stock price of Bancolombia has surged 14% in the past four weeks. CIB has an expected earnings growth rate of 20.8% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.2% over the last 30 days.
Lantheus Holdings is involved in developing, manufacturing, selling and distributing diagnostic medical imaging agents and products for the diagnosis of cardiovascular and other diseases. LNTH serves to hospitals, clinics, group practices, integrated delivery networks, group purchasing organizations, radiopharmacies and wholesalers.
The stock price of Lantheus Holdings has appreciated 12.9% in the past four weeks. LNTH has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 1% over the last 30 days.
Arcos Dorados operates as a franchisee of McDonald's with its operations divided in Brazil, North Latin America division, South Latin America and the Caribbean division. ARCO also runs quick-service restaurants in Latin America and the Caribbean.
The stock price of Arcos Dorados has advanced 8.6% in the past four weeks. ARCO has an expected earnings growth rate of 62.5% for the current year. The Zacks Consensus Estimate for current-year earnings improved 5.4% over the last 30 days.
PDC Energy is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids in the United States. The SRC Energy deal in 2020 has made PDCE the second-largest oil producer in the DJ Basin to go with its existing Delaware acreage.
PDC Energy has a favorable debt maturity profile with little in near-term due, while a disciplined approach to capital spending together with surging oil and natural gas prices should boost cumulative free cash flow generation to $2.7 billion in 2022 and 2023.
The stock price of PDC Energy has gained 8.1% in the past four weeks. PDCE has an expected earnings growth rate of 82.7% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.1% over the last 7 days.
Allegheny Technologies is a diversified specialty materials producer. ATI is likely to benefit from strength in the high-performance Materials & Components segment and demand growth in the Forgings business. Higher selling prices and increased market demand are also driving results in the Advanced Alloys & Solutions unit.
Allegheny Technologies is also focused on improving the cost structure. The company has efficiently managed capital expenditure, by adjusting its capital spending to meet the new demand levels. ATI is in the process of finishing several self-funded capital projects. ATI’s exit from low-margin standard stainless sheet products is also expected to drive margins in its Advanced Alloys & Solutions segment.
The stock price of Allegheny Technologies has risen 6.6% in the past four weeks. ATI has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3% over the last 7 days.
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 to day. 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.