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Things Are Looking Up for These Relative Price Strength Stocks
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The conclusion of 2023 witnessed a robust performance in U.S. stock markets, marking a significant recovery from the disappointing trends observed in 2022. Notably, the S&P 500, considered a key barometer of the stock market, recorded an impressive 24% increase over the course of the year. Contributing to this positive momentum are diminishing inflation rates, a moderation in crucial economic indicators and growing anticipation among investors that the era of rising interest rates may be drawing to a close.
However, the markets experienced a retreat in January following a substantial rally in 2023. The primary factor behind this downturn was the uncertainty surrounding the Federal Reserve's timing for initiating the first reduction in the benchmark interest rate. Recent statements from certain key members of the Fed's FOMC suggested a belief that the period of rate hikes has concluded, but there remains hesitancy about an immediate rate cut, contingent on the assessment of the prevailing economic conditions.
Amid this uncertain landscape, investors seeking exposure to the equity market should concentrate on identifying promising investment opportunities. A strategy to discern such potential opportunities involves scrutinizing indicators of relative price strength as a means to navigate the complexities introduced by evolving economic dynamics.
Relative Price Strength Strategy
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 for 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 industry or benchmark. 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 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 four stocks that made it through the screen:
Park Hotels & Resorts Inc. (PK - Free Report) : Based in Tysons, VA, the company is engaged in the hospitality business, primarily as a property owner. Park Hotels & Resorts’ expected EPS growth rate for three to five years is currently 10.5%, which compares favorably with the industry's growth rate of 7%. The company has a VGM Score of A.
Notably, the 2023 Zacks Consensus Estimate for Park Hotels & Resorts indicates 31.8% year-over-year earnings per share growth. The company has a market capitalization of $3.4 billion. PK shares have gone up 30% in a year.
LendingTree, Inc. (TREE - Free Report) : Founded in 1996, it is an online lending marketplace that connects borrowers with multiple loan operators. The 2023 Zacks Consensus Estimate for this firm indicates 100% year-over-year earnings per share growth. Headquartered in Charlotte, NC, TREE has a VGM Score of A.
LendingTree beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 255.5%, on average. TREE shares have risen 12.3% in a year.
Abercrombie & Fitch Co. (ANF - Free Report) : Based in New Albany, OH, Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. Over the past 60 days, this firm saw the Zacks Consensus Estimate for fiscal 2024 move up 34.5%. ANF has a VGM Score of A.
The fiscal 2024 Zacks Consensus Estimate for Abercrombie & Fitch indicates 2,284% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 713% on average. ANF shares have surged 255.2% in a year.
Owens Corning (OC - Free Report) : It participates in the home-building products industry and has evolved as a market-leading innovator of glass fiber technology. The 2023 Zacks Consensus Estimate for this firm indicates 7.7% year-over-year earnings per share growth. Headquartered in Toledo, OH, OC has a VGM Score of B.
Owens Corning beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 17.5%, on average. OC shares have shot up 65.6% 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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Things Are Looking Up for These Relative Price Strength Stocks
The conclusion of 2023 witnessed a robust performance in U.S. stock markets, marking a significant recovery from the disappointing trends observed in 2022. Notably, the S&P 500, considered a key barometer of the stock market, recorded an impressive 24% increase over the course of the year. Contributing to this positive momentum are diminishing inflation rates, a moderation in crucial economic indicators and growing anticipation among investors that the era of rising interest rates may be drawing to a close.
However, the markets experienced a retreat in January following a substantial rally in 2023. The primary factor behind this downturn was the uncertainty surrounding the Federal Reserve's timing for initiating the first reduction in the benchmark interest rate. Recent statements from certain key members of the Fed's FOMC suggested a belief that the period of rate hikes has concluded, but there remains hesitancy about an immediate rate cut, contingent on the assessment of the prevailing economic conditions.
Amid this uncertain landscape, investors seeking exposure to the equity market should concentrate on identifying promising investment opportunities. A strategy to discern such potential opportunities involves scrutinizing indicators of relative price strength as a means to navigate the complexities introduced by evolving economic dynamics.
Relative Price Strength Strategy
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 for 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 industry or benchmark. 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 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 four stocks that made it through the screen:
Park Hotels & Resorts Inc. (PK - Free Report) : Based in Tysons, VA, the company is engaged in the hospitality business, primarily as a property owner. Park Hotels & Resorts’ expected EPS growth rate for three to five years is currently 10.5%, which compares favorably with the industry's growth rate of 7%. The company has a VGM Score of A.
Notably, the 2023 Zacks Consensus Estimate for Park Hotels & Resorts indicates 31.8% year-over-year earnings per share growth. The company has a market capitalization of $3.4 billion. PK shares have gone up 30% in a year.
LendingTree, Inc. (TREE - Free Report) : Founded in 1996, it is an online lending marketplace that connects borrowers with multiple loan operators. The 2023 Zacks Consensus Estimate for this firm indicates 100% year-over-year earnings per share growth. Headquartered in Charlotte, NC, TREE has a VGM Score of A.
LendingTree beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 255.5%, on average. TREE shares have risen 12.3% in a year.
Abercrombie & Fitch Co. (ANF - Free Report) : Based in New Albany, OH, Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. Over the past 60 days, this firm saw the Zacks Consensus Estimate for fiscal 2024 move up 34.5%. ANF has a VGM Score of A.
The fiscal 2024 Zacks Consensus Estimate for Abercrombie & Fitch indicates 2,284% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 713% on average. ANF shares have surged 255.2% in a year.
Owens Corning (OC - Free Report) : It participates in the home-building products industry and has evolved as a market-leading innovator of glass fiber technology. The 2023 Zacks Consensus Estimate for this firm indicates 7.7% year-over-year earnings per share growth. Headquartered in Toledo, OH, OC has a VGM Score of B.
Owens Corning beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 17.5%, on average. OC shares have shot up 65.6% 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.