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5 Broker-Friendly Stocks to Counter Coronavirus Jitters

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With the market being rattled by the coronavirus pandemic, it is of little surprise that the first-quarter earnings season has been lackluster so far. As a consequence, airline giant Delta Air Lines (DAL - Free Report) incurred its first quarterly loss since 2010 due to depleted passenger revenues. Moreover, most companies withdrew their projections for the current year due to the prevalent uncertainty.

The oil price plunge further added to the woes. In fact, many energy companies including biggies likes Occidental Petroleum (OXY - Free Report) resorted to dividend cuts. Naturally, such an unprecedented crisis is keeping investors on edge as they fear that their hard-earned money invested in the stock market may go down the drain in the wake of such challenging times.

To avoid such untoward events, it is in the best interest of investors to get proper guidance from brokers who are deemed experts in the investment field.Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company’s profile and its prospects than individual investors.

To fulfill their objectives, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Broker opinion should thus act as a valuable manual for investors while deciding their course of action (buy, sell or hold) on a particular stock.

Direction of Earnings Estimates: A Winning Pointer

Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. The estimate revisions serve as an important indicator regarding the price of a stock.

For example, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, below-par earnings often induce stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price performance while formulating their investment strategy.

To take care of the earnings performance, we designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks.

Top-Line Consideration

However, designing a strategy based solely on the bottom line is unlikely to result in a winning strategy. Actually, 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. To address top-line concerns, we included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.

Screening Criteria

# (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.

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 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 eliminates the ADR and Canadian stocks.

Here are five of the 10 stocks that made it through the screen:

Headquartered in Purchase, NY, Atlas Air Worldwide Holdings provides outsourced aircraft and aviation operating services. Its 2020 earnings are expected to grow 26.9%. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Diebold Nixdorf (DBD - Free Report) is a provider of connected commerce solutions to financial institutions. This Zacks Rank #3 (Hold) Ohio-based company provides automatic teller machines, financial and point-of-sale services. The Zacks Consensus Estimate for current-quarter earnings indicates 63.5% growth from the year-ago reported figure.

Clearwater Paper Corporation (CLW - Free Report) : This Spokane, WA-based company carries a Zacks Rank of 2. The company produces pulp and paperboard at multiple facilities across the United States. The Zacks Consensus Estimate for 2020 earnings has been revised upward in excess of 100% on a year-over-year basis.

DXC Technology Company (DXC - Free Report) offers a broad array of professional services to clients in the global, commercial and government markets. This Zacks #3 Ranked company has a trailing four-quarter positive earnings surprise of 4.8%, on average. The carrier reported lower-than-expected earnings per share in one of the last four quarters, beating the Zacks Consensus Estimate in the other three.

Wood Dale, IL-based AAR Corporation (AIR - Free Report) provides various products and services to the aviation and defense industries worldwide. This #3 Ranked stock has a trailing four-quarter positive earnings surprise of 4.8%, on average. The carrier delivered better-than-estimated earnings per share in each of the last four quarters.

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.

Click here to sign up for a free trial to the Research Wizard today

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.

 


 

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