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Time To Pick These 3 Top Relative Price Strength Stocks

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We know that the market witnessed a broad-based decline in 2022 owing to a high-interest-rate regime and tighter monetary control adopted by the Fed to combat a 40-year high inflation. But as we have entered 2023, a very early sign of a rebound is visible on Wall Street, with peak inflation seemingly behind us. As proof of this, the S&P 500 — which tracks the biggest U.S.-listed companies — has crept above 4K for the first time in several weeks.

In particular, the market participants see a pending 25 basis-point interest rate hike next week as a sign of slowing Fed tightening, providing a much-needed respite to the economy. Yet, despite the central bank’s softening stance, traders and investors continue to see headwinds in the form of softness in consumer spending, worries over a tight labor market and disappointing fourth-quarter 2022 earnings numbers. As such, extremely volatile trading in U.S. markets is expected to continue for some time.

In the current jittery market environment, investors who might want to stay exposed to the equity setup should 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 the three stocks that made it through the screen:

Clarivate Plc (CLVT - Free Report) : The company provides information and analytic products worldwide, including scientific, patient and academic research to the top pharmaceutical firms. The 2022 Zacks Consensus Estimate for this London-based firm indicates 12.5% year-over-year earnings per share growth. CLVT has a VGM Score of B.

Clarivate beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 9.4%, on average. CLVT shares have lost 33.6% in a year.

Expedia Group (EXPE - Free Report) : One of the largest online travel companies in the world, Expedia Group’s web portals focus on travel planning, travel purchases and travel experience sharing. The 2022 Zacks Consensus Estimate for the Seattle, WA-based company indicates 350.9% year-over-year earnings per share growth. EXPE has a VGM Score of A.

Expedia Group beat the Zacks Consensus Estimate for earnings in three of the last four quarters. Over the past 90 days, the company saw the Zacks Consensus Estimate for 2022 move up 4.8%. EXPE stock has lost 32.5% in a year.

Haemonetics Corporation (HAE - Free Report) : The company provides blood management solutions to customers encompassing blood and plasma collectors, hospitals and health care providers globally. The fiscal 2023 Zacks Consensus Estimate for this Boston, MA-based firm indicates 11.2% year-over-year earnings per share growth. HAE has a VGM Score of A.

Haemonetics beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 12.1%, on average. HAE shares have surged 79.9% in a year.

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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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