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5 Broker-Friendly Stocks to Bank On as Volatility Persists
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The year 2022, which is drawing to a close, has witnessed extreme market volatility in the United States due to high inflation and the Fed’s hawkish stance to tame it. To combat the four-decade-high inflation, the Fed has raised interest rates multiple times this year. The latest rate hike to the tune of 50 basis points (bps) was in December.
Following that, the benchmark interest rate touched the highest level in 15 years (4.25-4.50). Higher interest rates shoot up the cost of borrowing, escalating the chances of an economic slowdown. What is more worrying is that the central bank now projects at least 75 bps of rate hike in 2023. The increased cost of borrowing implies that the market turmoil witnessed this year is likely to be present next year as well.
Despite the turbulence, shunning equities is a strict no-no. So, what’s the way forward to select winning stocks in this current uncertain scenario. One way is to pay heed to broker advice and take recourse to broker-friendly stocks like Cardinal Health (CAH - Free Report) , American Airlines (AAL - Free Report) , Boise Cascade (BCC - Free Report) , AmerisourceBergen and Centene Corporation (CNC - Free Report) .
Here’s Why Broker Advice is to be Followed
Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its prospects than individual investors. To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations.
As brokers closely follow the stocks in their coverage and revise earnings estimates only after carefully examining the pros and cons of an event for the concerned company, the question of their action being arbitrary does not arise. In fact, a rating upgrade or downgrade by brokers has the potential to influence the price of the stock.
Naturally, when investors see brokers revising their estimates or recommendation on a stock, they often assume that there is something in the stock that has attracted analyst attention.In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
Estimates can move north for a number of reasons – favorable earnings performance, a bullish guidance, product launch or any favorable macro scenario.
Don’t Ignore the Top Line
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar. To take care of the top line, we have considered the price/sales ratio for screening stocks.
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 test:
Cardinal Health is headquartered in Dublin, OH.Cardinal Health’s diversified product portfolio bodes well. CAH’s pharmaceutical segment is anticipated to drive growth.
Over the past 60 days, the CAH stock has seen the Zacks Consensus Estimate for 2022 and 2023 earnings being revised 1.92% and 1.34% upward, respectively. CAH currently carries a Zacks Rank #2 (Buy).
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 2023 earnings being revised 5.1% upward. AAL currently carries a Zacks Rank #3 (Hold).
Boise Cascade manufactures wood products and distributes building materials. BCC currently carries a Zacks Rank of 3 and operates primarily in the United States and Canada.
Earlier in the year, management increased BCC’s quarterly dividend payout by 25% to 15 cents per share. This reflects BCC’s financial strength. Dividend-paying stocks are highly sought after, especially in the current uncertain times. The Zacks Consensus Estimate for current-quarter earnings has improved 22.2% over the past 60 days.
Chesterbrook, PA-based AmerisourceBergen is one of the world’s largest pharmaceutical services companies. ABC is likely to benefit from generics growth and new product launches.
AmerisourceBergen has an impressive history with respect to earnings surprise. ABC surpassed the Zacks Consensus Estimate in three of the last four quarters. The average beat is 2.51%. ABC currently carries a Zacks Rank #3.
Centene is a well-diversified, multi-national healthcare company that primarily provides a set of services to the government sponsored healthcare programs. Centene’s top line has witnessed consistent growth since 2002. CNC boasts an impressive inorganic growth strategy for expanding its markets.
Centene has an impressive history with respect to earnings surprise. CNC surpassed the Zacks Consensus Estimate in each of the last four quarters. The average beat is 5.22%. CNC 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.
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 Broker-Friendly Stocks to Bank On as Volatility Persists
The year 2022, which is drawing to a close, has witnessed extreme market volatility in the United States due to high inflation and the Fed’s hawkish stance to tame it. To combat the four-decade-high inflation, the Fed has raised interest rates multiple times this year. The latest rate hike to the tune of 50 basis points (bps) was in December.
Following that, the benchmark interest rate touched the highest level in 15 years (4.25-4.50). Higher interest rates shoot up the cost of borrowing, escalating the chances of an economic slowdown. What is more worrying is that the central bank now projects at least 75 bps of rate hike in 2023. The increased cost of borrowing implies that the market turmoil witnessed this year is likely to be present next year as well.
Despite the turbulence, shunning equities is a strict no-no. So, what’s the way forward to select winning stocks in this current uncertain scenario. One way is to pay heed to broker advice and take recourse to broker-friendly stocks like Cardinal Health (CAH - Free Report) , American Airlines (AAL - Free Report) , Boise Cascade (BCC - Free Report) , AmerisourceBergen and Centene Corporation (CNC - Free Report) .
Here’s Why Broker Advice is to be Followed
Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its prospects than individual investors. To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations.
As brokers closely follow the stocks in their coverage and revise earnings estimates only after carefully examining the pros and cons of an event for the concerned company, the question of their action being arbitrary does not arise. In fact, a rating upgrade or downgrade by brokers has the potential to influence the price of the stock.
Naturally, when investors see brokers revising their estimates or recommendation on a stock, they often assume that there is something in the stock that has attracted analyst attention.In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
Estimates can move north for a number of reasons – favorable earnings performance, a bullish guidance, product launch or any favorable macro scenario.
Don’t Ignore the Top Line
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar. To take care of the top line, we have considered the price/sales ratio for screening stocks.
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 test:
Cardinal Health is headquartered in Dublin, OH.Cardinal Health’s diversified product portfolio bodes well. CAH’s pharmaceutical segment is anticipated to drive growth.
Over the past 60 days, the CAH stock has seen the Zacks Consensus Estimate for 2022 and 2023 earnings being revised 1.92% and 1.34% upward, respectively. CAH currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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 2023 earnings being revised 5.1% upward. AAL currently carries a Zacks Rank #3 (Hold).
Boise Cascade manufactures wood products and distributes building materials. BCC currently carries a Zacks Rank of 3 and operates primarily in the United States and Canada.
Earlier in the year, management increased BCC’s quarterly dividend payout by 25% to 15 cents per share. This reflects BCC’s financial strength. Dividend-paying stocks are highly sought after, especially in the current uncertain times. The Zacks Consensus Estimate for current-quarter earnings has improved 22.2% over the past 60 days.
Chesterbrook, PA-based AmerisourceBergen is one of the world’s largest pharmaceutical services companies. ABC is likely to benefit from generics growth and new product launches.
AmerisourceBergen has an impressive history with respect to earnings surprise. ABC surpassed the Zacks Consensus Estimate in three of the last four quarters. The average beat is 2.51%. ABC currently carries a Zacks Rank #3.
Centene is a well-diversified, multi-national healthcare company that primarily provides a set of services to the government sponsored healthcare programs. Centene’s top line has witnessed consistent growth since 2002. CNC boasts an impressive inorganic growth strategy for expanding its markets.
Centene has an impressive history with respect to earnings surprise. CNC surpassed the Zacks Consensus Estimate in each of the last four quarters. The average beat is 5.22%. CNC 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.