Equity markets are persistently rattled by the outbreak of the deadly coronavirus, which has claimed multiple lives so far. What is worse is that the virus, which was hitherto mostly restricted within China, has been spreading its tentacles to other countries like South Korea and Italy. The United States is also not immune to this latest health hazard with new cases being registered recently.
The impact of the coronavirus on markets is feared to be more damaging than the SARS outbreak in March 2003. Due to coronavirus-related woes, many companies issued bearish outlooks for the ongoing quarter or even the full year. In fact, travel-focused stocks are very badly hit. The International Air Transport Association expects airline revenues for 2020 to be hurt in excess of $29 billion due to this adversity.
However, the sole aim of investors while designing their portfolio is to generate handsome returns irrespective of the prevalent situation. They, after all, are putting their hard-earned money in stocks. One of the well-accepted investment strategies is to maintain a diversified portfolio to generate substantial returns irrespective of the market conditions.
Amid the extant confusion, it is almost impossible for individual investors to come up with a winning portfolio of stocks without proper guidance. Therefore, it is in the best interest of investors to seek advice from “experts in the field."
Who Are the Experts & Why?
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 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:
Cardinal Health CAH is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. The company has two reporting segments, namely Pharmaceutical and Medical. This Zacks Rank #2 (Buy) stock has seen the Zacks Consensus Estimate for current-year earnings being revised 5.5% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Anixter International AXE is a distributor of enterprise cabling and security solutions, electrical and electronic wire and cable solutions, and utility power solutions. The stock sports a Zacks Rank #1. The company’s expected earnings growth rate for 2020 is in excess of 100%.
Abercrombie & Fitch ANF operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids through a network of 881 stores across North America, Europe, Asia and the Middle East. This Zacks Rank #3 (Hold) company’ earnings missed the Zacks Consensus Estimate in only one of the last four quarters and outshined the same in the other three. The average beat is 13.2%.
Brookdale Senior Living BKD is a leading owner and operator of senior living facilities throughout the United States. The company has a Zacks Rank of 2. The estimated earnings per share growth rate (three to five years) for the company is 13%.
Fluor Corporation FLR provides engineering, procurement, construction and maintenance services through a number of subsidiaries. This Zacks #3 Ranked stock has seen the Zacks Consensus Estimate for 2020 earnings being revised 9.7% upward over the past seven 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.