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Strong Relative Price Strength Makes These 5 Stocks a Buy
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We are into the back half of the year and inflation continues to surprise on the upside. As measured by CPI data, it soared to a 41-year high in June. Together with the Russia-Ukraine war, rising-rate worries and a chorus of growth warnings, Wall Street posted the worst first half of a year in decades. In fact, the broad-market S&P 500 Index fell into the bear market during this period.
But all is not lost. For starters, the labor market remains strong, with unemployment near a 50-year low. Consumer demand, though having slowed, remains robust. Meanwhile, corporate earnings reports have largely held up in the early reporting cycle. However, such positive developments are in the minority, and most of the current macroeconomic signals are overwhelmingly bearish.
In addition to fears that the Fed’s aggressive monetary stance to fight mounting inflation could push the economy into a recession, per a large section of market watchers, prolonged supply-chain devastation stemming from China’s stringent COVID-19 curbs and the termination of the easy-money policy are likely to reduce aggregate demand, slowing the economy in the process. 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.
In the current jittery market environment, for investors who might want to stay exposed to the equity setup, 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 14 stocks that made it through the screen:
Equinor ASA (EQNR - Free Report) : The Stavanger, Norway-based firm is one of the premier integrated energy companies in the world, with operations spreading across 30 countries. Founded in 1972, Equinor has a VGM Score of A.
For 2022, EQNR has a projected earnings growth rate of 99.7%. Valued at around $111.9 billion, Equinor shares have gained around 78.3% in a year.
Greif, Inc. (GEF - Free Report) : Greif, based in Delaware, OH, is a leading global producer of industrial packaging solutions and services with manufacturing facilities located in over 40 countries. The company’s expected EPS growth rate for three to five years is currently 10%, which compares favorably with the industry's growth rate of 9.6%. GEF has a VGM Score of A.
Notably, Greif 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 22.9%, on average. GEF shares have gone up around 14.6% in a year.
Richardson Electronics, Ltd. (RELL - Free Report) : The LaFox, IL-based firm is an electronics parts manufacturer and distributor. Founded in 1947, Richardson Electronics has a VGM Score of B.
For fiscal 2022, RELL has a projected earnings growth rate of 332%. Valued at around $222 million, Richardson Electronics shares have surged around 102.2% in a year.
Mercer International Inc. (MERC - Free Report) : Mercer International is a leading producer of premier grade pulp. The 2022 Zacks Consensus Estimate for this New York-based firm indicates 46.9% year-over-year earnings per share growth. MERC has a VGM Score of B.
Mercer International beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 5%, on average. MERC shares have gained around 34.7% in a year.
TFI International Inc. (TFII - Free Report) : TFI International provides a range of transportation and logistics services in North America. The 2022 Zacks Consensus Estimate for the Canada-based firm indicates 30.2% year-over-year earnings per share growth. TFII has a VGM Score of A.
TFI International beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.9%, on average. TFII shares have lost around 10.7% 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
Strong Relative Price Strength Makes These 5 Stocks a Buy
We are into the back half of the year and inflation continues to surprise on the upside. As measured by CPI data, it soared to a 41-year high in June. Together with the Russia-Ukraine war, rising-rate worries and a chorus of growth warnings, Wall Street posted the worst first half of a year in decades. In fact, the broad-market S&P 500 Index fell into the bear market during this period.
But all is not lost. For starters, the labor market remains strong, with unemployment near a 50-year low. Consumer demand, though having slowed, remains robust. Meanwhile, corporate earnings reports have largely held up in the early reporting cycle. However, such positive developments are in the minority, and most of the current macroeconomic signals are overwhelmingly bearish.
In addition to fears that the Fed’s aggressive monetary stance to fight mounting inflation could push the economy into a recession, per a large section of market watchers, prolonged supply-chain devastation stemming from China’s stringent COVID-19 curbs and the termination of the easy-money policy are likely to reduce aggregate demand, slowing the economy in the process. 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.
In the current jittery market environment, for investors who might want to stay exposed to the equity setup, 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 14 stocks that made it through the screen:
Equinor ASA (EQNR - Free Report) : The Stavanger, Norway-based firm is one of the premier integrated energy companies in the world, with operations spreading across 30 countries. Founded in 1972, Equinor has a VGM Score of A.
For 2022, EQNR has a projected earnings growth rate of 99.7%. Valued at around $111.9 billion, Equinor shares have gained around 78.3% in a year.
Greif, Inc. (GEF - Free Report) : Greif, based in Delaware, OH, is a leading global producer of industrial packaging solutions and services with manufacturing facilities located in over 40 countries. The company’s expected EPS growth rate for three to five years is currently 10%, which compares favorably with the industry's growth rate of 9.6%. GEF has a VGM Score of A.
Notably, Greif 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 22.9%, on average. GEF shares have gone up around 14.6% in a year.
Richardson Electronics, Ltd. (RELL - Free Report) : The LaFox, IL-based firm is an electronics parts manufacturer and distributor. Founded in 1947, Richardson Electronics has a VGM Score of B.
For fiscal 2022, RELL has a projected earnings growth rate of 332%. Valued at around $222 million, Richardson Electronics shares have surged around 102.2% in a year.
Mercer International Inc. (MERC - Free Report) : Mercer International is a leading producer of premier grade pulp. The 2022 Zacks Consensus Estimate for this New York-based firm indicates 46.9% year-over-year earnings per share growth. MERC has a VGM Score of B.
Mercer International beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 5%, on average. MERC shares have gained around 34.7% in a year.
TFI International Inc. (TFII - Free Report) : TFI International provides a range of transportation and logistics services in North America. The 2022 Zacks Consensus Estimate for the Canada-based firm indicates 30.2% year-over-year earnings per share growth. TFII has a VGM Score of A.
TFI International beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.9%, on average. TFII shares have lost around 10.7% 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.