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Want to Bet on Relative Price Strength? Try These 5 Stocks
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The novel coronavirus outbreak triggered an unprecedented sell-off in equities and bonds. Stocks were clobbered and major indices crashed regularly, while in a bizarre turn of events, the U.S. oil futures hit negative territory.
However, over the past few months, markets, securities and crude have rebounded off their pandemic lows. Restrictions have been loosened and the economy has reopened, with activity limping back toward normalcy. Meanwhile, certain drug candidates and treatments offer a ray of hope in the coronavirus fight.
While the heaviest losses may be in the rear-view mirror, the road to recovery remains long and uncertain amid concerns over a fresh wave of the virus in many countries, the Fed’s cautious view of the American economy, the upcoming election-related uncertainty and simmering U.S.-China tensions.
Amid the entire coronavirus-induced mayhem, a few stocks held up to the crisis even as the virus knocked down businesses and industries. With the market expected to remain volatile over the near-to-medium term, one of the ways such potential plays could be identified is to look for signs of relative price strength.
The Relative Price Strength Approach
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential in determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industries or benchmarks. This is because betting on a winner always proves to be lucrative.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the past four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Here are five of the seven stocks that made it through the screen:
Asbury Automotive Group, Inc. (ABG - Free Report) : Asbury Automotive Group is one of the largest auto dealers in the United States. The 2020 Zacks Consensus Estimate for this Duluth, GA-based company indicates 10.9% earnings per share growth over 2019. Asbury Automotive Group has a VGM Score of A.
Expeditors International of Washington, Inc. (EXPD - Free Report) : A leading third-party logistics provider, Expeditors International of Washington has a VGM Score of B. Over 30 days, the Seattle, WA-based company has seen the Zacks Consensus Estimate for 2020 increase 7.4%.
DaVita Inc. (DVA - Free Report) : The Denver, CO based company is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure. The firm has a VGM Score of B and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 28.24%, on average.
Hibbett Sports, Inc. (HIBB - Free Report) : Hibbett Sports is a major athletic-inspired retailer, located in small and mid-sized markets across the country. Sporting a VGM Score of A, this Birmingham, AL-headquartered company’s expected EPS growth rate for three to five years currently stands at 13.8%, comparing favorably with the industry's growth rate of 8.3%.
DICK'S Sporting Goods (DKS - Free Report) : Founded in 1948 and headquartered in Coraopolis, PA, DICK’S Sporting operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc. The company has a VGM Score of A and a good earnings surprise history, having surpassed estimates in three of the last four quarters and missing in the other, delivering a positive earnings surprise of 15.48%, on average.
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.
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.
Image: Shutterstock
Want to Bet on Relative Price Strength? Try These 5 Stocks
The novel coronavirus outbreak triggered an unprecedented sell-off in equities and bonds. Stocks were clobbered and major indices crashed regularly, while in a bizarre turn of events, the U.S. oil futures hit negative territory.
However, over the past few months, markets, securities and crude have rebounded off their pandemic lows. Restrictions have been loosened and the economy has reopened, with activity limping back toward normalcy. Meanwhile, certain drug candidates and treatments offer a ray of hope in the coronavirus fight.
While the heaviest losses may be in the rear-view mirror, the road to recovery remains long and uncertain amid concerns over a fresh wave of the virus in many countries, the Fed’s cautious view of the American economy, the upcoming election-related uncertainty and simmering U.S.-China tensions.
Amid the entire coronavirus-induced mayhem, a few stocks held up to the crisis even as the virus knocked down businesses and industries. With the market expected to remain volatile over the near-to-medium term, one of the ways such potential plays could be identified is to look for signs of relative price strength.
The Relative Price Strength Approach
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential in determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industries or benchmarks. This is because betting on a winner always proves to be lucrative.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the past four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Here are five of the seven stocks that made it through the screen:
Asbury Automotive Group, Inc. (ABG - Free Report) : Asbury Automotive Group is one of the largest auto dealers in the United States. The 2020 Zacks Consensus Estimate for this Duluth, GA-based company indicates 10.9% earnings per share growth over 2019. Asbury Automotive Group has a VGM Score of A.
Expeditors International of Washington, Inc. (EXPD - Free Report) : A leading third-party logistics provider, Expeditors International of Washington has a VGM Score of B. Over 30 days, the Seattle, WA-based company has seen the Zacks Consensus Estimate for 2020 increase 7.4%.
DaVita Inc. (DVA - Free Report) : The Denver, CO based company is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure. The firm has a VGM Score of B and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 28.24%, on average.
Hibbett Sports, Inc. (HIBB - Free Report) : Hibbett Sports is a major athletic-inspired retailer, located in small and mid-sized markets across the country. Sporting a VGM Score of A, this Birmingham, AL-headquartered company’s expected EPS growth rate for three to five years currently stands at 13.8%, comparing favorably with the industry's growth rate of 8.3%.
DICK'S Sporting Goods (DKS - Free Report) : Founded in 1948 and headquartered in Coraopolis, PA, DICK’S Sporting operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc. The company has a VGM Score of A and a good earnings surprise history, having surpassed estimates in three of the last four quarters and missing in the other, delivering a positive earnings surprise of 15.48%, on average.
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.