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5 Broker-Friendly Stocks to Watch Despite Market Mayhem

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Mounting inflation in the United States is a key concern, implying that market volatility is still rampant. To tame the red-hot inflation, the Fed has hiked interest rates 300 basis points so far this year.  The central bank further vowed to raise interest rates to drag down inflation to its 2% target at best by 2025. Soaring interest rates will continue to increase the cost of borrowing, which in turn, will persistently affect consumer spending. In fact, the Fed also warned of economic hardship going forward.

Rising energy and food prices apart, supply-chain disruptions and the resultant supply-demand imbalance are aggravating the stock market volatility. This uncertainty caused the three major stock indexes — the Dow, the S&P 500 and the Nasdaq composite — to shed 8.8%, 9.3% and 10.5% of their value, respectively, in September.

However, this gloomy scenario does not mean that investors should dodge stocks. In fact, broker-friendly stocks like American Airlines (AAL - Free Report) , CVR Energy (CVI - Free Report) , C.H. Robinson (CHRW - Free Report) , Ford Motor Company F and DISH Network Corporation (DISH - Free Report) are worth keeping on one’s radar for healthy returns despite this market bloodbath.

Why Broker Advice is the Need of the Hour

Brokers, irrespective of their types (sell-side, buy-side or independent), embark on thorough research of the stocks under their coverage. They go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers indulge in extensive research, the question of their actions being arbitrary does not arise.

Therefore, the brokers’ opinion can be a valuable guide for investors. Thus, adhering to brokers’ well-researched information is of paramount importance, particularly in uncertain times such as the present scenario. This is because it is next to impossible for individual investors to keep track of the market nuances amid such economic upheavals and design a winning basket of stocks.

One of the well-accepted investment strategies is to maintain a diversified portfolio to generate handsome returns, irrespective of the market conditions. For instance, in the face of extremely low oil prices, analysts adopt a bullish stance on airline stocks and raise estimates. Naturally, adding such stocks to one’s portfolio amid an unpredictable situation might prove to be a winning strategy.

To take care of the earnings performance, we designed a screen based on improving broker recommendations and upward estimate revisions over the last four weeks.

Do Not Ignore the Top Line

However, designing a strategy based solely on the bottom line is unlikely to lead to a winning approach. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. To address top-line concerns, we included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.

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).

We have also added the following screening parameters to ensure that the strategy is a winning one:

Price-to-Sales = Bot%10(The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio).

Price greater than 5(as a stock trading below $5 will not likely create significant interest for most of the 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 made it through the screen:

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 stock has seen the Zacks Consensus Estimate for 2022 earnings being revised 8.42% upward. AAL currently carries a Zacks Rank #3 (Hold).

CVR Energy is an independent refiner and marketer of high-value transportation fuels. CVI is also a producer of ammonia and urea ammonia nitrate fertilizers. CVI's petroleum business includes full-coking sour crude refinery in Coffeyville, KS. Its efforts to reward its shareholders underline its strong financial position. The robust Nitrogen Fertilizer unit is supporting growth.

CVR Energy, currently sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 20.21% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here

C.H. Robinson Worldwide, currently carrying a Zacks Rank of 3, operates as an asset-light logistics player. The improving freight scenario in the United States is aiding this Minnesota-based freight broker. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill further confidence in the stock.

C.H. Robinson has an encouraging earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). CHRW has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 2.09% upward over the past 60 days.

Ford’s vehicle line-up, supported by F-series trucks, Maverick pickup and SUV models, including Escape, Explorer, Expedition, EcoSport and Edge is impressive. F’s North America market, which accounts for the bulk of total automotive revenues, is set to drive solid results.

Ford currently carries a Zacks Rank #3. F has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 0.5% upward over the past 60 days.

DISH Network’s focus on acquiring and retaining subscribers, who will be profitable in the long term, is commendable and is expected to drive growth. DISH created an extensive portfolio of spectrum, the most important component of wireless networks.

At DISH, earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters (missing the mark in the remaining two). The average beat is 6%. DISH currently carries a Zacks Rank #3.

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.


 

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