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5 Strong Picks to Ride the Wave of Relative Price Strength
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Historically, April has been a favorable month for Wall Street investors. However, this year, the month concluded on a disappointing note. Persistent inflation, a resilient job market and a significant drop in U.S. GDP growth eroded confidence in risky assets like stocks. Consequently, the S&P 500 Index plunged 4.2% in April, ending a five-month winning streak.
Yet, U.S. stock markets are likely to bounce back in May, following Federal Reserve Chairman Jerome Powell's clear statement rejecting interest rate hikes in the post-FOMC meeting. Investors also welcomed better-than-anticipated first-quarter 2024 earnings results.
Given the circumstances, it's wise for investors to focus on stocks with a strong relative price performance. This strategy allows them to capitalize on promising opportunities with the potential for high returns.
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 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 five of the 16 stocks that made it through the screen:
SkyWest, Inc. (SKYW - Free Report) : The company operates as a regional airline in the United States. The Zacks Consensus Estimate for 2024 earnings of this firm indicates 784.4% growth. Headquartered in Saint George, UT, SKYW has a VGM Score of A.
Over the past 60 days, the Zacks Consensus Estimate for 2024 has moved up 6.6%. SkyWest has a trailing four-quarter earnings surprise of roughly 128.1%, on average. SKYW shares have increased 175.3% in a year.
Powell Industries, Inc. (POWL - Free Report) : Powell Industries specializes in manufacturing different kinds of switchgear. Over the past 60 days, this Houston, TX-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 19.9%. POWL has a VGM Score of A.
The Zacks Consensus Estimate for fiscal 2024 earnings of Powell Industries indicates 119.4% growth. The company has a trailing four-quarter earnings surprise of roughly 66.9%, on average. POWL shares have gained 210.7% in a year.
Minerals Technologies Inc. (MTX - Free Report) : The company develops and produces a wide array of specialty mineral, mineral-based and synthetic mineral products used in various industries. The Zacks Consensus Estimate for 2024 earnings of Minerals Technologies indicates 20.7% growth. Headquartered in New York, MTX has a VGM Score of A.
Over the past 60 days, the Zacks Consensus Estimate for 2024 has moved up 6.6%. Minerals Technologies has a trailing four-quarter earnings surprise of roughly 9.2%, on average. MTX shares have gained 25.3% in a year.
The Vita Coco Company, Inc. (COCO - Free Report) : Based in New York, the company operates in the beverage business, primarily active in the coconut water segment. COCO’s expected EPS growth rate for three to five years is currently 15.3%, which compares favorably with the industry's growth rate of 13%. The company has a VGM Score of B.
Notably, the Zacks Consensus Estimate for The Vita Coco Company’s 2024 earnings per share indicates 37.8% year-over-year growth. The firm has a market capitalization of $1.5 billion. COCO shares have gone up 14% in a year.
Tenet Healthcare Corporation (THC - Free Report) : Based in Dallas, TX, the company owns and operates general hospitals and related healthcare facilities for urban and rural communities in numerous states. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved up 34.6%. THC has a VGM Score of A.
Tenet Healthcare beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 56.5%, on average. THC shares have gained 72.6% in a year.
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: Bigstock
5 Strong Picks to Ride the Wave of Relative Price Strength
Historically, April has been a favorable month for Wall Street investors. However, this year, the month concluded on a disappointing note. Persistent inflation, a resilient job market and a significant drop in U.S. GDP growth eroded confidence in risky assets like stocks. Consequently, the S&P 500 Index plunged 4.2% in April, ending a five-month winning streak.
Yet, U.S. stock markets are likely to bounce back in May, following Federal Reserve Chairman Jerome Powell's clear statement rejecting interest rate hikes in the post-FOMC meeting. Investors also welcomed better-than-anticipated first-quarter 2024 earnings results.
Given the circumstances, it's wise for investors to focus on stocks with a strong relative price performance. This strategy allows them to capitalize on promising opportunities with the potential for high returns.
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 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 five of the 16 stocks that made it through the screen:
SkyWest, Inc. (SKYW - Free Report) : The company operates as a regional airline in the United States. The Zacks Consensus Estimate for 2024 earnings of this firm indicates 784.4% growth. Headquartered in Saint George, UT, SKYW has a VGM Score of A.
Over the past 60 days, the Zacks Consensus Estimate for 2024 has moved up 6.6%. SkyWest has a trailing four-quarter earnings surprise of roughly 128.1%, on average. SKYW shares have increased 175.3% in a year.
Powell Industries, Inc. (POWL - Free Report) : Powell Industries specializes in manufacturing different kinds of switchgear. Over the past 60 days, this Houston, TX-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 19.9%. POWL has a VGM Score of A.
The Zacks Consensus Estimate for fiscal 2024 earnings of Powell Industries indicates 119.4% growth. The company has a trailing four-quarter earnings surprise of roughly 66.9%, on average. POWL shares have gained 210.7% in a year.
Minerals Technologies Inc. (MTX - Free Report) : The company develops and produces a wide array of specialty mineral, mineral-based and synthetic mineral products used in various industries. The Zacks Consensus Estimate for 2024 earnings of Minerals Technologies indicates 20.7% growth. Headquartered in New York, MTX has a VGM Score of A.
Over the past 60 days, the Zacks Consensus Estimate for 2024 has moved up 6.6%. Minerals Technologies has a trailing four-quarter earnings surprise of roughly 9.2%, on average. MTX shares have gained 25.3% in a year.
The Vita Coco Company, Inc. (COCO - Free Report) : Based in New York, the company operates in the beverage business, primarily active in the coconut water segment. COCO’s expected EPS growth rate for three to five years is currently 15.3%, which compares favorably with the industry's growth rate of 13%. The company has a VGM Score of B.
Notably, the Zacks Consensus Estimate for The Vita Coco Company’s 2024 earnings per share indicates 37.8% year-over-year growth. The firm has a market capitalization of $1.5 billion. COCO shares have gone up 14% in a year.
Tenet Healthcare Corporation (THC - Free Report) : Based in Dallas, TX, the company owns and operates general hospitals and related healthcare facilities for urban and rural communities in numerous states. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved up 34.6%. THC has a VGM Score of A.
Tenet Healthcare beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 56.5%, on average. THC shares have gained 72.6% in a year.
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.