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5 Stocks That Investors Are Loving Post Upgrade by Brokers
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The Q4 earnings season is slowly picking up pace with companies from multiple industries reporting their financial numbers. With results from more than 28%of S&P 500 participants already out, the season is off to a decent start, with earnings beats from quite a few players.
Investors will be hoping that the momentum continues and a high proportion of companies report better-than-expected numbers. This is because, generally, an earnings beat by a company leads to an uptick in its stock price. Given this backdrop, investors will like to add outperformers to their portfolios for healthy returns.
Nonetheless, the task is far from easy with a plethora of companies present in the market. Apart from this, the complexities related to the stock market and the surrounding uncertainties make it even more difficult for individual investors to select outperformers in their portfolios without proper guidance.
This clearly suggests that one needs to have in-depth knowledge of the minute details of the investing space. This is quite impossible for individual investors. Consequently, advice of “experts” in this field is much sought after by investors. The experts in the field of investing are brokers. We believe that investors bet on broker-favorite stocks like American Airlines (AAL - Free Report) , Delta Air Lines (DAL - Free Report) , Cleveland-Cliff (CLF - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Archer Daniels Midland Company (ADM - Free Report) for healthy returns.
Why Broker Advice Holds Value?
Brokers scrutinize publicly available financial documents, and also attend company conference calls and other presentations. Since brokers recommend (buy, sell or hold) a stock after thoroughly analyzing the nitty-gritty associated with the company, it is then perfect for investors to be guided by their direction of estimate revisions while deciding their course of action on a particular stock.
The estimate revisions serve as an important pointer regarding the price of a stock. 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, including a favorable earnings performance, bullish guidance, product launch or an optimistic macro scenario. To take care of the earnings performance, we designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
Winning Strategy
The above write-up clearly suggests that one can arrive at a winning portfolio of stocks by following broker actions. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions in earnings estimates over the last four weeks.
Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it is taken into consideration. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.
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.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio, the better. Companies meeting this criterion are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by 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.
Delta, currently carrying a Zacks Rank of 2, is based in Atlanta, GA. DAL is being bolstered by an uptick in demand for air travel (particularly for leisure). High fuel costs are, however, a bane.
Delta’s earnings outshined the Zacks Consensus Estimate in two of the last four quarters and missed the mark in the remaining two quarters, with the average negative surprise being 0.09%.
Cleveland-Cliffs is a leading iron ore producer in the United States. It supplies differentiated iron ore pellets under long-term contracts to major blast furnace steel producers in North America. The Mining and Pelletizing operation gains from low-cost, high-quality iron ore pellet production with substantial logistics and transportation advantages to serve the Great Lakes steel market. The company should gain from its merger with AK Steel Holding Corporation.
Over the past 60 days, the Zacks Consensus Estimate for CLF’s 2023 earnings has been revised 101% upward. Cleveland-Cliffs currently sports a Zacks Rank #1.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East.
The company stated recently that its brands performed well in the holiday season. Abercrombie, currently carrying a Zacks Rank #2, is working toward rationalizing its store base by reducing dependence on underperforming tourist-driven locations. The Zacks Consensus Estimate for current-year earnings has skyrocketed 200% over the past 60 days. ADM currently sports a Zacks Rank #1.
Archer Daniels: This Chicago, IL-based leading agricultural products player’s leadership in key global trends like flexitarian diets, nutrition and sustainable materials is a contributor to its momentum. ADM’s focus on making investments in assets and technological capabilities to serve customers efficiently is likely to be a key driver.
Archer Daniels’ Readiness program, positive cash flow and solid performance at the Nutrition unit are aiding results. ADM has been progressing well on its three strategic pillars, which are optimize, drive and growth, for a while. The Zacks Consensus Estimate for 2023 earnings has been revised 2.5% upward over the past 60 days. ADM currently sports a Zacks Rank #1.
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
5 Stocks That Investors Are Loving Post Upgrade by Brokers
The Q4 earnings season is slowly picking up pace with companies from multiple industries reporting their financial numbers. With results from more than 28%of S&P 500 participants already out, the season is off to a decent start, with earnings beats from quite a few players.
Investors will be hoping that the momentum continues and a high proportion of companies report better-than-expected numbers. This is because, generally, an earnings beat by a company leads to an uptick in its stock price. Given this backdrop, investors will like to add outperformers to their portfolios for healthy returns.
Nonetheless, the task is far from easy with a plethora of companies present in the market. Apart from this, the complexities related to the stock market and the surrounding uncertainties make it even more difficult for individual investors to select outperformers in their portfolios without proper guidance.
This clearly suggests that one needs to have in-depth knowledge of the minute details of the investing space. This is quite impossible for individual investors. Consequently, advice of “experts” in this field is much sought after by investors. The experts in the field of investing are brokers. We believe that investors bet on broker-favorite stocks like American Airlines (AAL - Free Report) , Delta Air Lines (DAL - Free Report) , Cleveland-Cliff (CLF - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Archer Daniels Midland Company (ADM - Free Report) for healthy returns.
Why Broker Advice Holds Value?
Brokers scrutinize publicly available financial documents, and also attend company conference calls and other presentations. Since brokers recommend (buy, sell or hold) a stock after thoroughly analyzing the nitty-gritty associated with the company, it is then perfect for investors to be guided by their direction of estimate revisions while deciding their course of action on a particular stock.
The estimate revisions serve as an important pointer regarding the price of a stock. 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, including a favorable earnings performance, bullish guidance, product launch or an optimistic macro scenario. To take care of the earnings performance, we designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
Winning Strategy
The above write-up clearly suggests that one can arrive at a winning portfolio of stocks by following broker actions. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions in earnings estimates over the last four weeks.
Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it is taken into consideration. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.
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.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio, the better. Companies meeting this criterion are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by 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 Zacks Consensus Estimate for AAL’s 2023 earnings has been revised 21.3% upward. American Airlines currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Delta, currently carrying a Zacks Rank of 2, is based in Atlanta, GA. DAL is being bolstered by an uptick in demand for air travel (particularly for leisure). High fuel costs are, however, a bane.
Delta’s earnings outshined the Zacks Consensus Estimate in two of the last four quarters and missed the mark in the remaining two quarters, with the average negative surprise being 0.09%.
Cleveland-Cliffs is a leading iron ore producer in the United States. It supplies differentiated iron ore pellets under long-term contracts to major blast furnace steel producers in North America. The Mining and Pelletizing operation gains from low-cost, high-quality iron ore pellet production with substantial logistics and transportation advantages to serve the Great Lakes steel market. The company should gain from its merger with AK Steel Holding Corporation.
Over the past 60 days, the Zacks Consensus Estimate for CLF’s 2023 earnings has been revised 101% upward. Cleveland-Cliffs currently sports a Zacks Rank #1.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East.
The company stated recently that its brands performed well in the holiday season. Abercrombie, currently carrying a Zacks Rank #2, is working toward rationalizing its store base by reducing dependence on underperforming tourist-driven locations. The Zacks Consensus Estimate for current-year earnings has skyrocketed 200% over the past 60 days. ADM currently sports a Zacks Rank #1.
Archer Daniels: This Chicago, IL-based leading agricultural products player’s leadership in key global trends like flexitarian diets, nutrition and sustainable materials is a contributor to its momentum. ADM’s focus on making investments in assets and technological capabilities to serve customers efficiently is likely to be a key driver.
Archer Daniels’ Readiness program, positive cash flow and solid performance at the Nutrition unit are aiding results. ADM has been progressing well on its three strategic pillars, which are optimize, drive and growth, for a while. The Zacks Consensus Estimate for 2023 earnings has been revised 2.5% upward over the past 60 days. ADM currently sports a Zacks Rank #1.
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.