In the game of stocks, winning means reaching a higher price.
However, finding a win-win strategy is easier said than done. When the markets are choppy marked by widespread global growth concerns, it is difficult for even an insightful investor to come up with a foolproof approach.
One could 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 a value trap if the inherent weakness in a selected stock is 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 witnessed price increases lately. Actually, such stocks 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 stocks, which 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. Therefore, 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.
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 10 stocks that made it through this screen:
Johnson Outdoors Inc. (JOUT - Free Report) is a leading global outdoor recreation company that turns ideas into adventure with innovative, top-quality products. In the last four quarters, the stock surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion.
Sun Hydraulics Corporation (SNHY - Free Report) is a leading designer and manufacturer of high-performance, screw-in hydraulic cartridge valves and manifolds, which control force, speed and motion as integral components in fluid power systems. The stock has a mixed earnings surprise history. It beat the Zacks Consensus Estimate twice in the trailing four quarters while missing it on the two other occasions. However, it pulled off a positive earnings surprise of 3.5%.
Columbus McKinnon Corporation (CMCO - Free Report) is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial and consumer markets worldwide. The stock has a mixed earnings surprise history. It beat the Zacks Consensus Estimate twice in the trailing four quarters while missing it on the two other occasions. However, it pulled off a positive earnings surprise of 10.7%.
Amtech Systems, Inc. (ASYS - Free Report) is engaged in the manufacture of several items of capital equipment, one of which is patented, used by customers in the manufacture of semiconductors. Last quarter, the company delivered a positive earnings surprise of 600%.
Triton International Limited (TRTN - Free Report) engages in acquisition, leasing, re-leasing, and sale of intermodal containers. Last quarter, the company delivered a positive earnings surprise of 8.5%.
POSCO (PKX - Free Report) , formerly known as Pohang Iron & Steel Company Ltd., manufactures hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries.
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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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