The coronavirus pandemic shook stock markets all around the globe, spooking investors in the process. Even though every nook and corner of the investing space is seen bearing the brunt of this health hazard, travel-focused stocks are one of the worst-hit with people unwilling to venture out, thereby shrinking travel demand and hurting revenues.
However, investors always look to make profits from their portfolios irrespective of the surrounding scenario. They are after all infusing their hard-earned money into the stock market. Therefore, in these trying times, it is best to design a well-diversified portfolio (including stocks from different spheres).
However, the task seems quite daunting as the market is chock-a-block with companies. Moreover, the complexities associated with the stock market make it even more difficult for individual investors to select outperformers for their portfolios in absence of proper guidance from “experts” in the field. These “experts” are brokers who are well-equipped with detailed knowledge on the space.
Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a deluge of information on a company’s profile and its prospects than individual investors. To enrich their database, they scan the minute details of the publicly available financial documents apart from attending company conference calls and other presentations.
Estimate revisions by brokers serve as a key pointer regarding the price of a stock. In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
The above write-up clearly suggests that by following broker actions, one can arrive at a gamut of lucrative stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions of earnings estimates over the last 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 foolproof.
# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of top 75 companies that have witnessed net upgrades over the last 4 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 4 weeks for the upcoming quarter).
We have also added the following screening parameters to ensure that the strategy is a winning one:
Price-to-Sales = Bot%10 (The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio).
Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of 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:
Halliburton Company (HAL - Free Report) : Houston, TX-based Halliburton Company is one of the largest oilfield service providers in the world, offering a variety of equipment, maintenance, and engineering and construction services to the energy, industrial and government sectors. This Zacks Rank #3 (Hold) player operates in more than 80 countries. The Zacks Consensus Estimate for current-quarter earnings has been revised 25% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chesterbrook, PA-based AmerisourceBergen (ABC - Free Report) is one of the world’s largest pharmaceutical services companies, which focuses on providing drug distribution and related services to reduce health care costs and improve patient outcomes. This Zacks Rank #2 (Buy) company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters. The average positive surprise is 5.7%.
Headquartered in Dublin, OH, Cardinal Health (CAH - Free Report) is a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers. This Zacks Rank #1 company’s current-year earnings is expected to grow 5.1% from the figure reported a year ago.
New York-based ABM Industries’ (ABM - Free Report) offerings include janitorial, energy, facilities engineering, electrical and lighting, landscape and turf, HVAC and mechanical, mission critical, and parking solutions. This Zacks Rank #3 company’s earnings topped the Zacks Consensus Estimate in each of the last four quarters. The average positive surprise is 12.6%.
Dillard's (DDS - Free Report) is a large departmental store chain featuring fashion apparel and home furnishings. The company carries a Zacks Rank of 3. The Zacks Consensus Estimate for current-quarter earnings has been revised 1.9% upward 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.