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3 Standout Relative Price Strength Stocks to Buy for 2023
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As we step into 2023, it is time to focus on good investment opportunities.
Last year was a tough one for Wall Street. In particular, the S&P 500 — which tracks the biggest U.S.-listed companies — closed down around 20% in 2022. It was the benchmark’s worst performance in more than a decade and ended a three-year winning streak.
With market participants concerned that the American central bank’s rate-hiking campaign to fight persistently high inflation would trigger an eventual recession, the major U.S. equity indices were caught up in a selloff even as the war between Russia and Ukraine continued to drag on.
Even now, the picture is quite mixed. While the Fed’s scaled-back rate hike of 50 basis points, following four back-to-back increases of 75 basis points each, provided a much-needed respite to the economy, softness in consumer spending, worries over a tight labor market and the lowering of this year’s GDP to 0.5% from the previous estimate of 1.2%, played spoilsport.
In the current jittery market environment, investors who might want to stay exposed to the equity setup should focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.
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 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings 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 last 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 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 the three stocks that made it through the screen:
American Airlines Group (AAL - Free Report) : The largest airline internationally, American Airlines’ primary business is to provide passenger and cargo services. The 2022 Zacks Consensus Estimate for the Fort Worth, TX-based carrier indicates 97.9% year-over-year earnings per share growth. AAL has a VGM Score of B.
American Airlines beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 8.6%, on average. AAL stock has lost 27.5% in a year.
Titan Machinery (TITN - Free Report) : The company is an agricultural and construction equipment retailer in the United States and Europe. The fiscal 2023 Zacks Consensus Estimate for this West Fargo, ND-based firm indicates 61.7% year-over-year earnings per share growth. TITN has a VGM Score of B.
Titan Machinery beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 59.9%, on average. TITN shares have gained 19.9% in a year.
DCP Midstream Partners : This leading energy infrastructure firm has a diversified portfolio of gathering, logistics, marketing, and processing assets. DCP Midstream has a VGM Score of A. Over the past 60 days, Denver, CO-based DCP saw the Zacks Consensus Estimate for 2022 move up 14%.
DCP Midstream beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 25.5%. Valued at around $8 billion, DCP has gained 35.2% in a year.
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.
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3 Standout Relative Price Strength Stocks to Buy for 2023
As we step into 2023, it is time to focus on good investment opportunities.
Last year was a tough one for Wall Street. In particular, the S&P 500 — which tracks the biggest U.S.-listed companies — closed down around 20% in 2022. It was the benchmark’s worst performance in more than a decade and ended a three-year winning streak.
With market participants concerned that the American central bank’s rate-hiking campaign to fight persistently high inflation would trigger an eventual recession, the major U.S. equity indices were caught up in a selloff even as the war between Russia and Ukraine continued to drag on.
Even now, the picture is quite mixed. While the Fed’s scaled-back rate hike of 50 basis points, following four back-to-back increases of 75 basis points each, provided a much-needed respite to the economy, softness in consumer spending, worries over a tight labor market and the lowering of this year’s GDP to 0.5% from the previous estimate of 1.2%, played spoilsport.
In the current jittery market environment, investors who might want to stay exposed to the equity setup should focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.
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 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings 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 last 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 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 the three stocks that made it through the screen:
American Airlines Group (AAL - Free Report) : The largest airline internationally, American Airlines’ primary business is to provide passenger and cargo services. The 2022 Zacks Consensus Estimate for the Fort Worth, TX-based carrier indicates 97.9% year-over-year earnings per share growth. AAL has a VGM Score of B.
American Airlines beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 8.6%, on average. AAL stock has lost 27.5% in a year.
Titan Machinery (TITN - Free Report) : The company is an agricultural and construction equipment retailer in the United States and Europe. The fiscal 2023 Zacks Consensus Estimate for this West Fargo, ND-based firm indicates 61.7% year-over-year earnings per share growth. TITN has a VGM Score of B.
Titan Machinery beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 59.9%, on average. TITN shares have gained 19.9% in a year.
DCP Midstream Partners : This leading energy infrastructure firm has a diversified portfolio of gathering, logistics, marketing, and processing assets. DCP Midstream has a VGM Score of A. Over the past 60 days, Denver, CO-based DCP saw the Zacks Consensus Estimate for 2022 move up 14%.
DCP Midstream beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 25.5%. Valued at around $8 billion, DCP has gained 35.2% in a year.
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.