With first-quarter earnings in full swing, market sentiment is largely influenced by corporate results and guidance. Though earnings are 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 into a 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 the 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 stock. So, when an analyst upgrades a stock, one can easily rely on it.
Still solely depending on analyst recommendations is not the right way to build investment portfolio. One must also take into consideration certain other factors to ensure solid returns.
Picking the Winning Strategy
We have a screening strategy that will help in your search for potential winners:
Broker Rating Upgrades (four weeks) of 1% or more: The screen selects stocks that have witnessed broker rating upgrades of 1% or more over the past 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 of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Here are five of the 14 stocks that qualified the screening:
Based in New York, Ralph Lauren Corporation (RL - Free Report) designs, markets and distributes lifestyle products. Its fiscal 2020 earnings are expected to rise 2.5%. The stock, currently carrying a Zacks Rank #2, has witnessed 8.3% upward revision in broker ratings over the past four weeks.
Cerner Corporation (CERN - Free Report) , headquartered in North Kansas City, MO, provides health care information technology solutions and tech-enabled services. Its projected earnings growth is 7.8% for 2019. The stock, carrying a Zacks Rank #2 at present, has witnessed 10.5% upward revision in broker ratings over the past four weeks.
The KeyW Holding Corporation , headquartered in Hanover, MD, provides national security solutions to the intelligence, cyber and counterterrorism communities. Its earnings growth is estimated to be 115.6% in 2018. The stock, carrying a Zacks Rank #2 currently, has witnessed 14.3% upward revision in broker ratings over the past four weeks.
Fifth Third Bancorp (FITB - Free Report) , headquartered in Cincinnati, OH, operates as a diversified financial services company. Its projected earnings growth is 9.8% for 2019. The stock, carrying a Zacks Rank #2 at present, has witnessed 4.6% upward revision in broker ratings over the past four weeks.
Dallas, TX-based Energy Transfer LP (ET - Free Report) provides energy-related services. Its 2019 earnings are expected to rise 24.4%. The stock, currently carrying a Zacks Rank #2, has witnessed 11.1% upward revision in broker ratings over the past four weeks.
Get the rest of the 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