“In the stock game, winning means reaching a higher price.” However, striking the right chord each time needs a fair amount of luck.
No matter how disciplined and systematic investors are, equity market volatility will always manage to get the better of them. While a few lucky ones rake in the moolah, others fall victim to ad hoc strategies.
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 fall into the value trap if the hidden weaknesses in 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?
Sounds a good idea? Here is how to execute it:
One should primarily target stocks that have recently been on a bull run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously witnessing an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create the 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 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 history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1 or 2: 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.
Just these few criteria narrowed down the universe from over 7,700 stocks to just four.
Here are those four stocks:
Alteryx Inc. (AYX - Free Report) provides self-service data analytics software platform that enhances productivity of business analysts. The company’s stock price has advanced 1.5% in the last four weeks. It has expected earnings growth of 72.7% for current year. The Zacks Consensus Estimate for the current year has improved by 88% in the last 60 days. Alteryx recorded a positive earnings surprise of 132.6% in the trailing four quarters.
Vericel Corp. (VCEL - Free Report) researches, develops, manufactures, markets and sells patient-specific expanded cellular therapies to repair and regenerate damaged tissues and organs. The company’s stock price has advanced 0.7% in the last four weeks. It has expected earnings growth of 42% for current year. The Zacks Consensus Estimate for the current year has improved by 31% in the last 60 days. Verical delivered a positive earnings surprise of 54.9% in the trailing four quarters.
Mitek Systems Inc. (MITK - Free Report) develops, markets and sells mobile image capture and identity verification software solutions in the United States and internationally. The company’s stock price has advanced 19.1% in the last four weeks. It has expected earnings growth of 37.9% for current year. The Zacks Consensus Estimate for the current year has improved by 2.5% in the last 60 days. Mitek Systems recorded a positive earnings surprise of 51.9% in the trailing four quarters.
Materialise NV (MTLS - Free Report) provides additive manufacturing software and 3D printing services in Europe, the Americas, Africa, and the Asia-Pacific. The company’s stock price has advanced 40.6% in the last four weeks. It has expected earnings growth of 350% for current year. The Zacks Consensus Estimate for the current year has improved by 10% in the last 60 days. Materialise delivered a positive earnings surprise of 87.5% in the trailing four quarters.
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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.