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Now's the Time to Buy These 5 Relative Price Strength Stocks
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U.S. stock markets are in the grip of extreme volatility, thanks to concerns about continuing inflation. The destruction of the global supply-chain system and geopolitical conflicts are also responsible for the dismal performance of equities, and the loss of interest from Wall Street. After robust returns during 2021, the benchmark S&P 500 Index has experienced a slowdown in 2022, losing around 14% so far.
U.S. inflation is currently at a 40-year high and the Fed is gradually shifting from an ultra-dovish to an ultra-hawkish policy regime. Per a large section of market watchers, supply-chain devastation and the termination of the easy-money policy are likely to reduce aggregate demand, pushing the economy into recession. In other words, it is likely that the mayhem will continue in the near term amid growing concerns about rising interest rates and economic sluggishness.
For investors who might want to stay exposed to the market during this uncertain phase, 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
Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers, or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.
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 37 stocks that made it through the screen:
Westlake Corporation (WLK - Free Report) : The Houston, TX-based firm is a global manufacturer and supplier of a range of products that include ethylene, polyethylene, styrene, vinyl intermediates, PVC, PVC Pipe, PVC windows, fence and decking components. Founded in 1986, Westlake has a VGM Score of B.
For 2022, WLK has a projected earnings growth rate of 20.4%. Valued at around $16.9 billion, Westlake shares have gained around 37.9% in a year.
H&R Block, Inc. (HRB - Free Report) : It is a leading provider of tax preparation services associated with income tax return preparation in the United States, Canada and Australia. H&R Block has a VGM Score of A. Over the past 30 days, the Kansas City, MO-based HRB saw the Zacks Consensus Estimate for fiscal 2022 move up 10.9%.
H&R Block beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 21%. Valued at around $5.2 billion, HRB has increased some 42.8% in a year.
Murphy USA Inc. (MUSA - Free Report) : Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States. The 2022 Zacks Consensus Estimate for this El Dorado, AR-based firm indicates 7.5% year-over-year earnings per share growth. MUSA has a VGM Score of A.
Murphy USA beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 49.1%, on average. MUSA shares have rocketed around 87.7% in a year.
Dillard’s, Inc. (DDS - Free Report) : Dillard's, based in Little Rock, AR, is a large departmental store chain featuring fashion apparel and home furnishings. The company’s expected EPS growth rate for three to five years is currently 14.6%, which compares favorably with the industry's growth rate of 11.5%. DDS has a VGM Score of A.
Notably, Dillard’s 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 224.1%, on average. DDS shares have gone up around 160.9% in a year.
Ryder System, Inc. (R - Free Report) : Ryder System is recognized as one of the world's largest providers of integrated logistics and transportation solutions. The 2022 Zacks Consensus Estimate for the Miami, FL-based firm indicates 40.8% year-over-year earnings per share growth. R has a VGM Score of A.
Ryder System beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 48.2%, on average. R shares have gained around 4.7% 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: Shutterstock
Now's the Time to Buy These 5 Relative Price Strength Stocks
U.S. stock markets are in the grip of extreme volatility, thanks to concerns about continuing inflation. The destruction of the global supply-chain system and geopolitical conflicts are also responsible for the dismal performance of equities, and the loss of interest from Wall Street. After robust returns during 2021, the benchmark S&P 500 Index has experienced a slowdown in 2022, losing around 14% so far.
U.S. inflation is currently at a 40-year high and the Fed is gradually shifting from an ultra-dovish to an ultra-hawkish policy regime. Per a large section of market watchers, supply-chain devastation and the termination of the easy-money policy are likely to reduce aggregate demand, pushing the economy into recession. In other words, it is likely that the mayhem will continue in the near term amid growing concerns about rising interest rates and economic sluggishness.
For investors who might want to stay exposed to the market during this uncertain phase, 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
Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers, or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.
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 37 stocks that made it through the screen:
Westlake Corporation (WLK - Free Report) : The Houston, TX-based firm is a global manufacturer and supplier of a range of products that include ethylene, polyethylene, styrene, vinyl intermediates, PVC, PVC Pipe, PVC windows, fence and decking components. Founded in 1986, Westlake has a VGM Score of B.
For 2022, WLK has a projected earnings growth rate of 20.4%. Valued at around $16.9 billion, Westlake shares have gained around 37.9% in a year.
H&R Block, Inc. (HRB - Free Report) : It is a leading provider of tax preparation services associated with income tax return preparation in the United States, Canada and Australia. H&R Block has a VGM Score of A. Over the past 30 days, the Kansas City, MO-based HRB saw the Zacks Consensus Estimate for fiscal 2022 move up 10.9%.
H&R Block beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 21%. Valued at around $5.2 billion, HRB has increased some 42.8% in a year.
Murphy USA Inc. (MUSA - Free Report) : Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States. The 2022 Zacks Consensus Estimate for this El Dorado, AR-based firm indicates 7.5% year-over-year earnings per share growth. MUSA has a VGM Score of A.
Murphy USA beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 49.1%, on average. MUSA shares have rocketed around 87.7% in a year.
Dillard’s, Inc. (DDS - Free Report) : Dillard's, based in Little Rock, AR, is a large departmental store chain featuring fashion apparel and home furnishings. The company’s expected EPS growth rate for three to five years is currently 14.6%, which compares favorably with the industry's growth rate of 11.5%. DDS has a VGM Score of A.
Notably, Dillard’s 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 224.1%, on average. DDS shares have gone up around 160.9% in a year.
Ryder System, Inc. (R - Free Report) : Ryder System is recognized as one of the world's largest providers of integrated logistics and transportation solutions. The 2022 Zacks Consensus Estimate for the Miami, FL-based firm indicates 40.8% year-over-year earnings per share growth. R has a VGM Score of A.
Ryder System beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 48.2%, on average. R shares have gained around 4.7% 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.