It is a well-documented fact that the U.S. economy is in good shape. Despite this, there are certain developments, which are keeping investors on the edge. While trade-related tensions with China continue to be a source of worry, President Trump’s threat to exclude Canada from a new NAFTA deal has also increased investor concern. Moreover, the ongoing troubles in emerging markets have also been a source of worry for investors.
Expert Advice - A Must in this Scenario
It is a well-known fact that investors irrespective of the market conditions strive to design a winning portfolio of stocks. They, after all, are putting their hard-earned money into stocks. However, given the above backdrop, the task of building a portfolio of stocks for handsome returns is a herculean task.
One of the tried and tested strategies is to maintain a well-diversified portfolio (i.e. including stocks from different industries) so that one rakes in solid returns at all times. However, it is easier said than done. With multiple stocks flooding the market at any point of time, it is next to impossible to design one’s portfolio without guidance from people equipped with proper knowhow about the market.
Given this backdrop, it is in the best interest of investors to seek guidance from “experts in the field."
Who are the Experts & Why?
The “experts” in the field of investing are brokers who are equipped with thorough knowledge about the space. Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its prospects than individual investors.
To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Broker opinion should thus act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
Making the Most of Broker Opinions
The above write-up clearly suggests that by following broker actions, one can arrive at a winning portfolio of stocks. Keeping this in mind, we have designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions in earnings estimates over the past four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it has been included. The price/sales ratio takes care of the company’s top line, making the strategy effective.
# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of top 75 companies that have witnessed net upgrades over the last four 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 four 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 criteria are in the 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:
Delek US Holdings, Inc. (DK - Free Report) is an independent refiner, transporter and marketer of petroleum products. This Zacks Rank #3 company is based in Brentwood, TN. The company has an impressive history with respect to earnings per share. It outshined the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 92.6%.
ArcBest Corporation (ARCB - Free Report) , sporting a Zacks Rank #1 (Strong Buy), is headquartered in Fort Smith, AR. It provides freight transportation services and solutions. The Zacks Consensus Estimate for current-year earnings has been revised upward to the tune of 8.3% over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Verso Corp. (VRS - Free Report) produces coated freesheet, coated ground wood and uncoated super calendared papers and pulp. It sports a Zacks Rank #1. The Zacks Consensus Estimate for the current year has improved more than 46% over the past 30 days.
Pennsylvania-based DICK’S Sporting Goods Inc. (DKS - Free Report) offers athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, water sports, etc. This Zacks Rank #3 company outshined the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is18.2%.
Dillard's Inc. (DDS - Free Report) is a large departmental store chain featuring fashion apparel and home furnishings. The company carries a Zacks Rank #3. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days.
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.
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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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