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5 Broker-Favorite Stocks to Watch Amid Ongoing Banking Woes

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Highlighting the fact that the banking sector is indeed undergoing tough times, Moody’s Investors Service downgraded its view on the banking system in the United States to negative from stable. Moody’s attributed the decision to the rapidly deteriorating operating environment. In the United States, two major regional banks, namely, Silicon Valley Bank and Signature Bank, collapsed. Another regional bank, First Republic Bank, is on life support.

The ongoing turmoil in the banking sector — popularly known as the engine of economic growth — implies that there is no end to the uncertainty and volatility that has gripped markets for quite some time. The liquidity issues have moved to Europe as well, with Swiss lender, Credit Suisse, being at the center of the turbulence. UBS has agreed to buy the beleaguered Credit Suisse for $3.2 billion.

Despite the current turmoil and economic uncertainty, investors should not shun equities. So what’s the way forward to reap handsome returns from one’s portfolio even during the current uncertainty?

One way to proceed in this scenario is by adhering to broker advice. By following this method, broker-friendly stocks like American Airlines (AAL - Free Report) , CVR Energy (CVI - Free Report) , Delek US Holdings (DK - Free Report) , Brighthouse Financial (BHF - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) should be present in an investor’s watchlist for healthy returns.

Why Broker Advice Holds Value?

Brokers scrutinize publicly available financial documents and 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 11.9% 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.

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 a 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, has surpassed the Zacks Consensus Estimate in each of the past four quarters by an average of 40.85%. The Zacks Consensus Estimate for current-year earnings has improved 23.2% over the past 60 days.

Brentwood, TN-based Delek US Holdings is an independent refiner, transporter and marketer of petroleum products. DK’s extensive downstream operations within the Permian Basin grant it a fairly significant competitive edge over its peers in the long term.

Delek US Holdings currently carries a Zacks Rank #3 (Hold). DK surpassed the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark in the other one). The average beat is in excess of 100%.

Brighthouse Financial is one of the largest providers of annuity and life insurance products in the United States. A compelling suite of life and annuity products, strong market presence, exit from the transition service agreement and growing individual insurance and investment income should drive growth for this Zacks Rank #1 insurer.

The Zacks Consensus Estimate for BHF’s 2023 and 2024 earnings indicates a year-over-year increase of 33.5% and 11.5%, respectively. The consensus estimate for 2023 and 2024 earnings has moved up 6.1% and 6.3%, respectively, in the past 60 days. 

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 #3, is working toward rationalizing its store base by reducing its dependence on underperforming tourist-driven locations. The Zacks Consensus Estimate for current-year earnings has skyrocketed more than 400% from the 2022 actual earnings figure.

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:

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