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5 Broker-Friendly Stocks to Tide Over the Market Doldrums

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The S&P 500 Index has lost 17.3% of its value so far this year amid massive market volatility. The other two major stock indexes, namely the Dow Jones Industrial Average and the tech-heavy Nasdaq composite have also been in the red with a decline of 12.1% and 28%, respectively, year to date. After robust returns during 2021, Wall Street experienced a slowdown in 2022.

A spate of headwinds, ranging from the prolonged Russia-Ukraine war, record-high inflation and a higher interest rate environment rendered extreme market volatility, thus inducing the current sorry state of affairs. Despite the current turmoil, shunning equities is an absolute no-no for investors. So what’s the way forward to reap handsome returns from one’s portfolio even during the current uncertainty?

One way to proceed in this scenario is by adhering to broker advice. By following this method, broker-friendly stocks like, Cross Country Healthcare (CCRN - Free Report) , American Airlines (AAL - Free Report) , ArcBest Corporation (ARCB - Free Report) ), ClearwaterPaper (CLW - Free Report) and Avnet (AVT - Free Report) should be included in an investor’s watchlist for healthy returns.

As brokers indulge in extensive research of stocks under their coverage, they have access to much detailed information on a company. To this end, they attend company conference calls/presentations and scrutinize every piece of information available in the public domain before advising investors. Naturally, broker advice acts as an invaluable guide for investors in their bid to garner the maximum from their portfolios.

Direction of Earnings Estimates: A Good Pointer

Since brokers follow the stocks in their coverage with great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. The estimate revisions serve as an important pointer regarding the price of a stock.

For example, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings often cause stock price depreciation. Investors tend to be guided by the direction of estimate revisions and the stock price while formulating their investment strategy.

Making the Most of Broker Aid

The above write-up clearly suggests that by following broker actions, one can arrive at a promising portfolio of stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward earnings estimate revisions 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 effective.

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 criterion are in the bottom 10% of our universe of over 7,700 stocks.

Price greater than 5: A stock trading below $5 will not likely be of significant interest to 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 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 passed the screen:

Cross Country Healthcare is currently benefiting from the pandemic-led rise 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 the continuous buoyancy in 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 83.66% upward in the past 60 days. CCRN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Airlines is based in Fort Worth, TX. The gradual increase in air-travel demand (particularly for leisure) is aiding AAL. However, high fuel costs are hurting the bottom line.

Over the past 60 days, the AAL stock has seen the Zacks Consensus Estimate for 2022 earnings being revised 56.91% upward. AAL currently carries a Zacks Rank of 3.

ArcBest Corporation currently carries a Zacks Rank #3 (Hold). ARCB’s earnings trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average being 25.58%. The Zacks Consensus Estimate for ARCB’s 2022 earnings has been revised 23.73% upward in the past 60 days.

Improving freight conditions in the United States bode well for ArcBest. Solid customer demand and higher market rates are supporting ARCB.

Clearwater Paper is being aided by robust packaging demand. CLW’s commitment to reducing its debt levels and deploying a prudent capital structure provides ample liquidity. Continued focus on operational execution will drive margins. 

The Zacks Consensus Estimate for Clearwater Paper’s 2022 earnings has been revised 18.42% upward in the past 60 days. CLW, currently carrying a Zacks Rank #2 (Buy), has an impressive surprise history with its earnings having surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 37.76%.

Avnet is benefiting from robust demand for its products across Asia, Europe, the Middle East and Africa (EMEA) regions. Improvement in the Americas also served as a tailwind. Its continued focus on boosting the IoT capabilities is helping it expand in the newer markets and win customers. Moreover, cost-saving efforts are aiding profitability.

Avnet, currently sporting a Zacks Rank of 1, has an impressive surprise history with its earnings having surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 21.22%. The AVT stock has appreciated 2.3% in a year’s time.

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 backtest 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.