“Strike while the iron is hot” is appropriate in all walks of life and the investing world is no exception. Investors, after all, are putting their hard-earned money into a stock and expectations of handsome returns are quite obvious.
However, the uncertainties associated with the investment world and the deluge of stocks flooding the market make the task a daunting one. In the wake of this, picking the right stocks is quite similar to looking for a needle in a haystack.
Moreover, with time at a premium these days, it is next to impossible for investors to keep track of market movements to identify opportune moment(s) for buying or offloading a particular stock to maximize returns. Therefore, guidance from proper channels is a must.
Broker Advice to the Rescue
The “experts” in the field of investing are brokers who are equipped with detailed knowledge about 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 prospects 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. Broker opinion should thus act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
Earnings Estimate Revisions
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 pointer regarding the price of a stock.
For example, an earnings beat by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price while formulating their investment strategy. To take care of the earnings performance, we have designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks.
What About Revenues?
While we have talked about the bottom line in detail, the top line (revenue portion) cannot be ignored. Actually, according to many market watchers a revenue beat is more creditable for a company than a mere earnings outperformance. This especially holds true in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar or lackluster demand for travel (which will hurt travel-focused companies). To address top-line concerns, we have included in our screen the price/sales ratio that serves as a strong complementary valuation metric.
# (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 for the upcoming quarter in the past four weeks.
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 criterion 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 takes out the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
Abercrombie & Fitch Co. ANF is a leading, global specialty retailer of apparel and accessories, which markets its products under three renowned brands - the iconic Abercrombie & Fitch brand, the Hollister brand and abercrombie kids. The company, based in New Albany, OH, has stores across North America, Europe, Asia and the Middle East, as well as an online presence. This Zacks Rank #3 (Hold) stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 6.3% upward over the last 30 days.
Express, Inc. EXPR is a specialty retailer of women's and men's apparel in the United States. The company, based in Columbus, OH, operates retail outlets in high-traffic shopping malls, lifestyle centers and street locations across the country. This Zacks Rank #2 (Buy) stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 7.7% upward over the last seven days.
Boise Cascade Company BCC is one of the largest producers of engineered wood products and plywood in North America and a leading wholesale distributor of building products in the United States. This Zacks Rank #1 (Strong Buy) stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised upward in excess of 100% over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA BZH is one of the country’s largest single-family homebuilders with a presence in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia. This Zacks Rank #3 company, based in Atlanta, GA, has an impressive earnings track record, having surpassed expectations in three of the last four quarters with an average surprise in excess of 100%.
Bristow Group BRS is a leading provider of helicopter services for major transportation operations in the United States, Gulf of Mexico and the North Sea and other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, Mexico, Nigeria, Russia and Trinidad. The company, based in Houston, TX, has delivered an impressive earnings surprise of 65.3% in the most recent quarter. It has seen its stock price rally in excess of 56% over the last three months. The stock carries a Zacks Rank #3.
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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Bristow Group Inc (BRS) : Free Stock Analysis Report
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
Beazer Homes USA, Inc. (BZH) : Free Stock Analysis Report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Express, Inc. (EXPR) : Free Stock Analysis Report
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