For Immediate Release
Chicago, IL – January 4, 2019 - Stocks in this week’s article are ArcBest Corp. (ARCB - Free Report) , American Airlines Group (AAL - Free Report) , Cardinal Health (CAH - Free Report) , Century Aluminum Company (CENX - Free Report) and CVS Health Corp. (CVS - Free Report) .
5 Broker Favorite Stocks to Watch Out For
Proper guidance is often the difference between success and failure in life. The same holds true for the investing world. The need for proper guidance is all the more required now as the Q4 earnings season is not too far away. Investors are on the lookout for stocks, which have the potential to surpass earnings expectations in the upcoming reporting cycle. It is a well-known fact that earnings beat generally leads to stock price appreciation.
However, the task of designing one’s portfolio with outperformers is by no means an easy one. The uncertainties in the investment world make the task of selecting stocks for handsome returns a daunting one. Moreover, a number of stocks flood the market at any given point in time. In the absence of proper guidance, identifying a winning stock is akin to searching for ‘a needle in a haystack’ for an investor. The proper guidance, in this respect, comes from brokers who are deemed to be experts, equipped with vast knowledge of investing.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide unbiased opinion to investors after thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
Be Guided by Earnings Estimate Revisions
Broker ratings are backed by sound logic and are by no means arbitrary. Brokers not only scrutinize the publicly available financial documents but also attend company conference calls and other presentations. Naturally, it is in the best interest of investors to pay heed to such well-researched information as they aim to generate maximum returns from their portfolio.
Since brokers closely follow the stocks in their coverage, they revise earnings estimates only after carefully examining the pros and cons of an event for the concerned company. In fact, a rating upgrade or downgrade by brokers has the potential to influence the price of the stock.
Naturally, when investors see brokers revise estimates or recommendation on a stock, they often assume that there is something that has attracted analysts’ attention. In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
Estimates can move north for a number of reasons – favorable earnings performance, a bullish guidance, product launch or any favorable macro scenario.
Ignore the Top Line at Your Own Peril
A strategy designed solely on the basis of the bottom line is unlikely to result in a winning strategy. According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar or lackluster demand for travel (which will hurt travel-focused companies). To address top-line concerns, we have included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/345487/5-broker-favorite-stocks-to-watch-out-for
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