During an earnings season, market sentiment is largely influenced by corporate results and guidance. Though earnings performance is a good enough indicator of a stock’s future performance, identifying future growth drivers is not always an easy task. A company’s better-than-expected earnings may not always translate to solid price appreciation for its stock due to some reasons that are not easy to identify.
Therefore, it is wise to depend on expert advice. One way to do this is to follow broker recommendations.
Brokers have a better understanding of stocks, deeper industry knowledge and a grasp over the economy at large. They scrutinize the company’s fundamentals and place them against the current economic backdrop to find out how the stock will fare as an investment option.
Brokers go through the company’s publicly available documents, attend conference calls and are in direct communication with top management. At times, to get more insight into the company’s products and services offered, they even communicate with customers.
After an in-depth research, brokers decide to rate the company’s stock. So, when an analyst upgrades a stock, you can easily rely on it.
Still just depending on broker recommendations is not the correct way to build your investment portfolio. You should also take into consideration certain other factors to ensure solid returns.
Choosing the Winning Strategy
We have a screening strategy that will help in your search for potential winners:
Broker Rating Upgrades (4 weeks) of 1% or more: The screen selects stocks that have witnessed broker rating upgrades of 1% or more over the last four weeks.
Current Price greater than 5: The stocks must be trading above $5.
Average 20-day Volume greater than 100,000: A large trading volume guarantees that the stock is easily tradable.
Zacks Rank equal to #1 or #2: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) have a proven record of success. You can see the complete list of today’s Zacks #1 Rank stocks here.
VGM Score equal to A: Our research shows that stocks with a VGM Score of A when combined with a Zacks Rank #1 or 2 offer the best upside potential.
Here are five of the 19 stocks that made it through the screen:
Polaris Industries Inc. (PII - Free Report) , headquartered in Medina, MN, designs, engineers, manufactures, and markets power sports vehicles. Its 2018 earnings are expected to increase 18.3%. The stock has witnessed 5.6% upward revision in broker ratings over the past four weeks.
Based in East Greenville, PA-Knoll, Inc. designs, manufactures, markets, and sells commercial and residential furniture, accessories, textiles, fine leathers, and felt for the workplace and home. The company’s earnings are expected to increase 15.7% for 2018. The stock has witnessed 33.3% upward revision in broker ratings over the past four weeks.
Headquartered in Medford, OR, Lithia Motors, Inc. (LAD - Free Report) operates automotive franchises, and retails new and used vehicles. The company’s earnings are expected to rise 15.8% in 2018. The stock has witnessed 11.1% upward revision in broker ratings over the past four weeks.
Long Beach, CA-based Molina Healthcare, Inc. (MOH - Free Report) provides Medicaid-related solutions. The company’s earnings are expected to surge 190.2% in 2018. The stock has witnessed 7.1% upward revision in broker ratings over the past four weeks.
Santander Consumer USA Holdings Inc. (SC - Free Report) , headquartered in Dallas, TX, is a specialized consumer finance company, providing vehicle finance and third-party servicing. Its 2018 earnings are expected to increase 9.8%. The stock has witnessed 7.1% upward revision in broker ratings over the past four weeks.
Get the remaining 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.
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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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