Back to top

Analyst Blog

Investors at all times seek a winning strategy, but it is easier said than done. And when the market is as volatile as it is now, things may take a turn for the worse any moment.

One could take resort to commonly used techniques to find beaten down stocks that have the potential to recover faster than others. However, even such investment choices bear the risk of disappointment. Particularly, one could be stuck in the value trap if the hidden weaknesses in a selected stock are not identified.

So, wouldn’t it be a safer strategy to look for stocks that are winners currently and have the potential to gain further?

Here’s how to execute it:

One should primarily look for stocks that have recently been witnessing price increase. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen like the losers. So, looking at those stocks that have already won the game and are capable of beating the benchmark that they have already set sounds rational.

However, recent price strength alone cannot create magic, so you need to set other relevant parameters to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Here are six of the 11 stocks that made it through this screen:

Primo Water Corporation (PRMW - Free Report) operates as a provider of three- and five-gallon purified bottled water and water dispensers through major retailers nationwide. The company has surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average positive surprise of 270%.

Evolution Petroleum Corporation (EPM - Free Report) is an independent oil and gas company. The company is engaged in acquiring, exploring and developing properties for the production of crude oil and natural gas, onshore in the United States. Last quarter, Evolution Petroleum posted earnings of 9 cents per share, which were substantially higher than the Zacks Consensus Estimate of 2 cents.

Asure Software Inc. (ASUR - Free Report) , formerly Forgent Networks, Inc., is a provider of web-based workforce management solutions that enable organizations to manage their office environment, as well as their human resource and payroll processes. Last quarter, the company posted earnings of 15 cents, much better than the Zacks Consensus Estimate of a loss of 2 cents.

AAR Corporation (AIR - Free Report) is a worldwide leader in supplying aftermarket products and services to the global aerospace/aviation industry. Last quarter, the company posted earnings of 29 cents, a penny higher than the Zacks Consensus Estimate.

Argan Inc. (AGX - Free Report) , headquartered in Rockville, MD, through its wholly owned Southern Maryland Cable, Inc. subsidiary, provides inside premise wiring services to the federal government and also provides underground and aerial construction services and splicing to major telecommunications and utilities customers. The company beat the Zacks Consensus Estimate twice and missed it on two occasions in the preceding four quarters. However, the average was a positive surprise of 13.3%.

Advanced Accelerator Applications S.A. (AAAP - Free Report) is a radiopharmaceutical company. The company, develops, produces and commercializes molecular nuclear medicine diagnostic and therapeutic products. Last quarter, the company had posted loss of 4 cents as compared with the Zacks Consensus Estimate of a loss of 24 cents.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.

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.

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »