The rapid spread of the highly contagious Delta variant of COVID-19 in the United States is threatening to derail the economic recovery that was witnessed in the last few months. The downbeat jobs data for August is primarily due to the Delta strain-induced spike in COVID-19 cases. According to most market watchers, this unfortunate scenario caused a subdued job growth scene.
This uncertainty-filled backdrop is more than enough to unsettle even the steadiest investors. However, irrespective of the surroundings, investors want to make handsome profits from their chosen portfolio of stocks. The task is easier said than done. With a universe of stocks flooding the market at any point of time, it is highly likely that individual investors without any proper guidance will end up with a wrong selection of stocks for his/her portfolio, thereby ruining the prospects of reaping gains.
Who Are the Experts & Why?
The “experts” in the field of investing are brokers. They are equipped with detailed knowledge of the space.
Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its potential than individual investors. To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations.
Estimate revisions by brokers serve as an important 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 winning portfolio of 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 is 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.
To ensure that the strategy is a winning one, covering all bases, we 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 eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
American Airlines Group AAL: This Fort Worth, TX-based airline currently carries a Zacks Rank #3 (Hold). The gradual increase in air-travel demand (particularly for leisure) is dented by the slowdown in bookings and a spurt in cancellations following the spread of the Delta variant of coronavirus. However, the company’s efforts to control costs amid this scenario of revenue-weakness is encouraging. Its bottom line outshined the Zacks Consensus Estimate in each of the last four quarters, the average being 2.44%.
ArcBest Corporation ARCB provides freight transportation services and solutions. Improving freight conditions in the United States bode well for this presently Zacks Rank #1 (Strong Buy). Solid customer demand and higher market rates are supporting growth at ArcBest. The stock has witnessed the Zacks Consensus Estimate for current-quarter earnings being revised 24.84% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy Company BBY is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services. The company continuously focuses on improving its digital capabilities. Best Buy, currently carrying a Zacks Rank #2 (Buy), is constantly conducting various tests and pilots to become a more customer-centric, digitally-focused, efficient company. Its liquidity position is also sound. Backed by these tailwinds, the stock has seen the Zacks Consensus Estimate for current-year earnings move 14.92% north over the past 60 days.
Peabody Energy BTU: St Louis, MO-based Peabody Energy engages in the coal-mining business and has both thermal and metallurgical operations to manage. Revival in the domestic and international coal markets augurs well for this currently Zacks #2 Ranked stock that outperformed on earnings in three of the last four quarters (lagging the consensus mark in the remaining one).
Abercrombie & Fitch Company ANF, currently sporting a Zacks Rank of 1, operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. Abercrombie is making significant progress in expanding its digital and omni-channel capabilities to better engage with consumers.The company’s efforts to manage costs are supporting its bottom line. The Zacks Consensus Estimate for current-year earnings has been raised 33.3% over the past 60 days on the back of these positives.
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.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Peabody Energy Corporation (BTU) : Free Stock Analysis Report
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
ArcBest Corporation (ARCB) : Free Stock Analysis Report
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