In the stock market, finding a win-win strategy is easier said than done. No matter how disciplined and systematic investors are, equity market volatility will always manage to the better of them. A few lucky ones rake in the moolah but others fall victim to ad hoc strategies.
One could take resort to the commonly used techniques to find beaten down stocks that have the potential to recover faster than others. But this bears the risk of disappointment as one could fall into the value trap if the selected stock’s hidden weakness is not identified.
In the stock game, winning means reaching a higher price. So, how about looking for the current winners that have the potential to gain further?
Sounds a good idea? Here is how to execute it:
One should primarily look for stocks that have recently witnessed a price increase. Actually, stocks that have recently seen price strength have high chances of carrying the momentum forward.
If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen like the losers. So, looking at those that have already won the game and are capable of beating the benchmark that they have set for themselves sounds rational.
Nevertheless, recent price strength alone cannot do the trick. Club together other relevant parameters in your game plan to get the optimum return on your investment.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.
Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.
Current Price greater than 5: The stocks must all be trading at a minimum of $5 or higher.
Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Here are seven of the 11 stocks that made it through this screen:
HomeStreet, Inc. HMST is a diversified financial services company engaged in real estate lending, including mortgage banking activities, and retail and business banking operations, in the Pacific Northwest and Hawaii. The company beat the Zacks Consensus Estimate thrice in the preceding four quarters, with an average positive surprise of 17.3%.
Horizon Global Corp. HZN is a designer, manufacturer and distributor of towing, trailering, cargo management and accessory products for original equipment, aftermarket and retail customers. The company beat the Zacks Consensus Estimate twice and missed in the other two of the preceding four quarters. However, the average was a positive surprise of 11.9%.
Hallador Energy Co. HNRG, formerly known as Hallador Petroleum Company, is engaged in the production of steam coal. The company's primary operating property is the Carlisle underground coal mine located in western Indiana. Last quarter, the company posted earnings of 19 cents, beating the Zacks Consensus Estimate of 2 cents.
Ducommun Inc. DCO manufactures components and assemblies principally for domestic and foreign commercial and military aircraft and space programs. Ducommun is a subcontractor to Lockheed Martin on the Space Shuttle external tank and a supplier of components for the Space Shuttle as well as for the International Space Station. Last quarter, the company posted a positive earnings surprise of 21.4%.
Tata Motors Limited TTM is India's leading automobile manufacturer. The company is engaged in designing, developing, manufacturing, assembling, selling, and exporting of passenger and commercial vehicles.
Evotec AG EVTCY is a leader in the discovery and development of novel small molecule drugs. The company has established a powerful platform applicable to targets across all therapeutic areas and has expertise in Central Nervous System related diseases for which it is building a pipeline of drug candidates for partnering.
Liberty Broadband Corp. LBRDA, through its subsidiaries, engages in providing digital cable services to residential and commercial customers; and entertainment, information, and communications solutions. It also provides wireless location positioning and related services.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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DUCOMMUN INC DE (DCO): Free Stock Analysis Report
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HALLADOR ENERGY (HNRG): Free Stock Analysis Report
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HORIZON GLBL CP (HZN): Free Stock Analysis Report
HOMESTREET INC (HMST): Free Stock Analysis Report
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