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5 Top-Ranked Stocks to Ride the Relative Price Strength Tide
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Wall Street experienced a strong rebound in the first half of 2023, recovering from the disappointments of the previous year. The S&P 500 Index surged by 15.9% during this period, marking its best first half since 2019. This positive performance can be attributed to the steady decline in inflation rates, a strong labor market and the Federal Reserve's decision to reduce the magnitude of interest rate hikes. The bullish sentiment has even led to the U.S. consumer sentiment jumping to the highest level in almost two years.
In particular, soft inflation data for June (both consumer price index and producer price index) have strengthened market participants’ confidence that the Fed’s current rate hiking cycle is approaching its end. This could mean a brightening outlook for the stock market.
Investors who want to take advantage of the bullish 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
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures a winning option on your hands.
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 15 stocks that made it through the screen:
KB Home (KBH - Free Report) : The company is a well-known homebuilder in the United States. Over the past 60 days, this Los Angeles, CA-based firm saw the Zacks Consensus Estimate for fiscal 2023 move up 19.6%. KBH has a VGM Score of A.
KB Home beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 20.7%, on average. KBH shares have gained 79.4% in a year.
Owens Corning (OC - Free Report) : It participates in the home-building products industry and has evolved as a market-leading innovator of glass fiber technology. Over the past 60 days, this Toledo, OH-based firm saw the Zacks Consensus Estimate for 2023 move up 3.1%. OC has a VGM Score of B.
Owens Corning beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 15.1%, on average. OC shares have gained 67.5% in a year.
EnerSys (ENS - Free Report) : The company engages in the manufacturing, marketing and distribution of various industrial batteries. Over the past 60 days, this Reading, PA-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 15.7%. ENS has a VGM Score of A.
EnerSys’ expected EPS growth rate for three to five years is currently 14%, which compares favorably with the industry's growth rate of 10.4%. It has a trailing four-quarter earnings surprise of roughly 9%, on average. ENS shares have increased 90.5% in a year.
PACCAR Inc. (PCAR - Free Report) : The company is a leading manufacturer of heavy-duty trucks in the world and has substantial manufacturing exposure to light/medium trucks. The 2023 Zacks Consensus Estimate for the Bellevue, WA-based firm indicates 317.7% year-over-year earnings per share growth.
PACCAR beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 16.6%, on average. PCAR shares have gained 63.5% in a year.
BJ’s Restaurants, Inc. (BJRI - Free Report) : Based in Huntington Beach, CA, BJ’s Restaurants owns and operates a chain of high-end casual dining eateries in the United States. Over the past 60 days, this firm saw the Zacks Consensus Estimate for 2023 move up 4.4%. BJRI has a VGM Score of B.
The 2023 Zacks Consensus Estimate for BJ’s Restaurants indicates 317.7% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 93%, on average. BJRI shares have increased 55.7% 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.(ENS - Free Report) (ENS - Free Report)
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 Top-Ranked Stocks to Ride the Relative Price Strength Tide
Wall Street experienced a strong rebound in the first half of 2023, recovering from the disappointments of the previous year. The S&P 500 Index surged by 15.9% during this period, marking its best first half since 2019. This positive performance can be attributed to the steady decline in inflation rates, a strong labor market and the Federal Reserve's decision to reduce the magnitude of interest rate hikes. The bullish sentiment has even led to the U.S. consumer sentiment jumping to the highest level in almost two years.
In particular, soft inflation data for June (both consumer price index and producer price index) have strengthened market participants’ confidence that the Fed’s current rate hiking cycle is approaching its end. This could mean a brightening outlook for the stock market.
Investors who want to take advantage of the bullish 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
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures a winning option on your hands.
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 15 stocks that made it through the screen:
KB Home (KBH - Free Report) : The company is a well-known homebuilder in the United States. Over the past 60 days, this Los Angeles, CA-based firm saw the Zacks Consensus Estimate for fiscal 2023 move up 19.6%. KBH has a VGM Score of A.
KB Home beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 20.7%, on average. KBH shares have gained 79.4% in a year.
Owens Corning (OC - Free Report) : It participates in the home-building products industry and has evolved as a market-leading innovator of glass fiber technology. Over the past 60 days, this Toledo, OH-based firm saw the Zacks Consensus Estimate for 2023 move up 3.1%. OC has a VGM Score of B.
Owens Corning beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 15.1%, on average. OC shares have gained 67.5% in a year.
EnerSys (ENS - Free Report) : The company engages in the manufacturing, marketing and distribution of various industrial batteries. Over the past 60 days, this Reading, PA-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 15.7%. ENS has a VGM Score of A.
EnerSys’ expected EPS growth rate for three to five years is currently 14%, which compares favorably with the industry's growth rate of 10.4%. It has a trailing four-quarter earnings surprise of roughly 9%, on average. ENS shares have increased 90.5% in a year.
PACCAR Inc. (PCAR - Free Report) : The company is a leading manufacturer of heavy-duty trucks in the world and has substantial manufacturing exposure to light/medium trucks. The 2023 Zacks Consensus Estimate for the Bellevue, WA-based firm indicates 317.7% year-over-year earnings per share growth.
PACCAR beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 16.6%, on average. PCAR shares have gained 63.5% in a year.
BJ’s Restaurants, Inc. (BJRI - Free Report) : Based in Huntington Beach, CA, BJ’s Restaurants owns and operates a chain of high-end casual dining eateries in the United States. Over the past 60 days, this firm saw the Zacks Consensus Estimate for 2023 move up 4.4%. BJRI has a VGM Score of B.
The 2023 Zacks Consensus Estimate for BJ’s Restaurants indicates 317.7% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 93%, on average. BJRI shares have increased 55.7% 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.(ENS - Free Report) (ENS - Free Report)
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.