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5 Attractive Relative Price Strength Plays in Today's Market
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Despite some moderation from a 40-year high level, inflation in the United States is proving to be much more stubborn than expected. According to the recently released Consumer Price Index (CPI) numbers for September, the figure stood at 8.2%. While it’s officially the third-straight down month — and lower notably from June’s record 9.1% — it’s high enough for the Fed to continue hiking interest rates.
In fact, inflation fears and the headwinds of higher interest rates have roiled the market this year, with the S&P 500 losing more than 25% so far. Worse, experts apprehend continued upward pressure on most prices in the near-to-medium term.
As such, extremely volatile trading in the U.S. markets since the beginning of 2022 is expected to persist going forward too. Risks stemming from recession fears, geopolitical tensions and dwindling liquidity may also lead to a rough road for equities.
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
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 17 stocks that made it through the screen:
ExxonMobil (XOM - Free Report) : ExxonMobil is one of the largest publicly traded oil and gas companies in the world, with operations spanning almost every corner of the globe. The 2022 Zacks Consensus Estimate for the Irving, TX-based firm indicates 144.2% year-over-year earnings per share growth. XOM has a VGM Score of A.
ExxonMobil beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 1.6%, on average. DINO shares have gained 62.7% in a year.
Lamb Weston Holdings (LW - Free Report) : Based in Eagle, ID, the company is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries. LW’s expected EPS growth rate for three to five years is currently 26.9%, which compares favorably with the industry's growth rate of 11.6%. Lamb Weston has a VGM Score of A.
Notably, Lamb Weston beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 47.3%, on average. LW shares have gone up 50.8% in a year.
Ooma, Inc. (OOMA - Free Report) : It is a cloud-based phone company offering its services to small business and residential customers. Ooma has a VGM Score of B. Over the past 60 days, Sunnyvale, CA-based OOMA saw the Zacks Consensus Estimate for fiscal 2023 move up 20.5%.
Ooma beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 28.6%. Valued at around $346 million, OOMA has lost 25.1% in a year.
NexTier Oilfield Solutions : NexTier Oilfield Solutions is a provider of technical products and services to drillers of oil and gas wells. The 2022 Zacks Consensus Estimate for this Houston, TX-based firm indicates 423.3% year-over-year earnings per share growth. NEX has a VGM Score of A.
NexTier Oilfield Solutions beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 269.5%, on average. NEX shares have gained 105.2% in a year.
Hanmi Financial Corporation (HAFC - Free Report) : It is a bank-holding entity mainly catering to Korean-Americans residing in the United States. Hanmi Financial has a VGM Score of A. Over the past 90 days, Los Angeles, CA-based HAFC saw the Zacks Consensus Estimate for 2022 move up 10.5%.
Hanmi Financial beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 43.4%. Valued at around $734 million, HAFC has gained 28% 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
5 Attractive Relative Price Strength Plays in Today's Market
Despite some moderation from a 40-year high level, inflation in the United States is proving to be much more stubborn than expected. According to the recently released Consumer Price Index (CPI) numbers for September, the figure stood at 8.2%. While it’s officially the third-straight down month — and lower notably from June’s record 9.1% — it’s high enough for the Fed to continue hiking interest rates.
In fact, inflation fears and the headwinds of higher interest rates have roiled the market this year, with the S&P 500 losing more than 25% so far. Worse, experts apprehend continued upward pressure on most prices in the near-to-medium term.
As such, extremely volatile trading in the U.S. markets since the beginning of 2022 is expected to persist going forward too. Risks stemming from recession fears, geopolitical tensions and dwindling liquidity may also lead to a rough road for equities.
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
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 17 stocks that made it through the screen:
ExxonMobil (XOM - Free Report) : ExxonMobil is one of the largest publicly traded oil and gas companies in the world, with operations spanning almost every corner of the globe. The 2022 Zacks Consensus Estimate for the Irving, TX-based firm indicates 144.2% year-over-year earnings per share growth. XOM has a VGM Score of A.
ExxonMobil beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 1.6%, on average. DINO shares have gained 62.7% in a year.
Lamb Weston Holdings (LW - Free Report) : Based in Eagle, ID, the company is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries. LW’s expected EPS growth rate for three to five years is currently 26.9%, which compares favorably with the industry's growth rate of 11.6%. Lamb Weston has a VGM Score of A.
Notably, Lamb Weston beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 47.3%, on average. LW shares have gone up 50.8% in a year.
Ooma, Inc. (OOMA - Free Report) : It is a cloud-based phone company offering its services to small business and residential customers. Ooma has a VGM Score of B. Over the past 60 days, Sunnyvale, CA-based OOMA saw the Zacks Consensus Estimate for fiscal 2023 move up 20.5%.
Ooma beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 28.6%. Valued at around $346 million, OOMA has lost 25.1% in a year.
NexTier Oilfield Solutions : NexTier Oilfield Solutions is a provider of technical products and services to drillers of oil and gas wells. The 2022 Zacks Consensus Estimate for this Houston, TX-based firm indicates 423.3% year-over-year earnings per share growth. NEX has a VGM Score of A.
NexTier Oilfield Solutions beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 269.5%, on average. NEX shares have gained 105.2% in a year.
Hanmi Financial Corporation (HAFC - Free Report) : It is a bank-holding entity mainly catering to Korean-Americans residing in the United States. Hanmi Financial has a VGM Score of A. Over the past 90 days, Los Angeles, CA-based HAFC saw the Zacks Consensus Estimate for 2022 move up 10.5%.
Hanmi Financial beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 43.4%. Valued at around $734 million, HAFC has gained 28% 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.