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Leverage Relative Price Strength With These 5 Top Stocks
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Continuing the trend since the start of this year, the month of May turned out tumultuous for Wall Street, bringing wild market action and volatility. A plethora of issues, including historically high inflation, stuttering economic growth, worries about a recession and a higher interest rate regime, tighter monetary policies adopted by major central banks, and prolonged supply-chain disruptions, significantly hurt market participants’ confidence.
However, a strong domestic demand picture and the labor market’s return to the pre-pandemic level helped the equities recover somewhat. At the end, May was evenly poised for investors, with the S&P 500 — regarded as one of the finest reflections of the stock market — changed little, edging down 0.6% for the month. Overall, after robust returns during 2021, the benchmark S&P 500 Index has experienced a slowdown in 2022, losing around 14% so far.
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
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:
Kronos Worldwide, Inc. (KRO - Free Report) : The Dallas, TX-based firm is a leading producer and marketer of TiO2, a pigment for providing whiteness, brightness and opacity in a broad range of products. Founded in 1916, Kronos Worldwide has a VGM Score of B.
For 2022, KRO has a projected earnings growth rate of 110.2%. Valued at around $2.3 billion, Kronos Worldwide shares have gained around 19.2% in a year.
Ulta Beauty, Inc. (ULTA - Free Report) : It offers a wide range of products, including cosmetics, fragrance, skincare, hair care, bath and body products, and salon styling tools in stores. Ulta Beauty has a VGM Score of B. Over the past 30 days, the Bolingbrook, IL-based ULTA saw the Zacks Consensus Estimate for fiscal 2023 move up 8%.
Ulta Beauty beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 49.8%. Valued at around $21.1 billion, ULTA has increased some 23.7% in a year.
AMN Healthcare Services, Inc. (AMN - Free Report) : AMN Healthcare is a provider of nurses, physicians and other medical professionals to hospitals and other allied facilities in the United States. The 2022 Zacks Consensus Estimate for this Dallas, TX-based firm indicates 30.3% 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 15.6%, on average. AMN shares have added around 7.2% in a year.
Marathon Petroleum Corporation (MPC - Free Report) : Marathon Petroleum, based in Findlay, OH, is a leading independent refiner, transporter and marketer of oil products. The company’s expected EPS growth rate for three to five years is currently 18.5%, which compares favorably with the industry's growth rate of 16.1%. MPC has a VGM Score of A.
Notably, Marathon Petroleum 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 65%, on average. MPC shares have gone up around 65.6% in a year.
Sanderson Farms, Inc. : Sanderson Farms is a poultry processing company that produces, processes, markets and distributes fresh and frozen chicken products. The fiscal 2022 Zacks Consensus Estimate for the Laurel, MS-based firm indicates 100.1% year-over-year earnings per share growth. SAFM has a VGM Score of A.
Sanderson Farms beat the Zacks Consensus Estimate for earnings in two of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 60.5%, on average. SAFM shares have gained around 23.2% 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
Leverage Relative Price Strength With These 5 Top Stocks
Continuing the trend since the start of this year, the month of May turned out tumultuous for Wall Street, bringing wild market action and volatility. A plethora of issues, including historically high inflation, stuttering economic growth, worries about a recession and a higher interest rate regime, tighter monetary policies adopted by major central banks, and prolonged supply-chain disruptions, significantly hurt market participants’ confidence.
However, a strong domestic demand picture and the labor market’s return to the pre-pandemic level helped the equities recover somewhat. At the end, May was evenly poised for investors, with the S&P 500 — regarded as one of the finest reflections of the stock market — changed little, edging down 0.6% for the month. Overall, after robust returns during 2021, the benchmark S&P 500 Index has experienced a slowdown in 2022, losing around 14% so far.
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
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:
Kronos Worldwide, Inc. (KRO - Free Report) : The Dallas, TX-based firm is a leading producer and marketer of TiO2, a pigment for providing whiteness, brightness and opacity in a broad range of products. Founded in 1916, Kronos Worldwide has a VGM Score of B.
For 2022, KRO has a projected earnings growth rate of 110.2%. Valued at around $2.3 billion, Kronos Worldwide shares have gained around 19.2% in a year.
Ulta Beauty, Inc. (ULTA - Free Report) : It offers a wide range of products, including cosmetics, fragrance, skincare, hair care, bath and body products, and salon styling tools in stores. Ulta Beauty has a VGM Score of B. Over the past 30 days, the Bolingbrook, IL-based ULTA saw the Zacks Consensus Estimate for fiscal 2023 move up 8%.
Ulta Beauty beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 49.8%. Valued at around $21.1 billion, ULTA has increased some 23.7% in a year.
AMN Healthcare Services, Inc. (AMN - Free Report) : AMN Healthcare is a provider of nurses, physicians and other medical professionals to hospitals and other allied facilities in the United States. The 2022 Zacks Consensus Estimate for this Dallas, TX-based firm indicates 30.3% 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 15.6%, on average. AMN shares have added around 7.2% in a year.
Marathon Petroleum Corporation (MPC - Free Report) : Marathon Petroleum, based in Findlay, OH, is a leading independent refiner, transporter and marketer of oil products. The company’s expected EPS growth rate for three to five years is currently 18.5%, which compares favorably with the industry's growth rate of 16.1%. MPC has a VGM Score of A.
Notably, Marathon Petroleum 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 65%, on average. MPC shares have gone up around 65.6% in a year.
Sanderson Farms, Inc. : Sanderson Farms is a poultry processing company that produces, processes, markets and distributes fresh and frozen chicken products. The fiscal 2022 Zacks Consensus Estimate for the Laurel, MS-based firm indicates 100.1% year-over-year earnings per share growth. SAFM has a VGM Score of A.
Sanderson Farms beat the Zacks Consensus Estimate for earnings in two of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 60.5%, on average. SAFM shares have gained around 23.2% 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.