For Immediate Release
Screen of the Week of Zacks Investment Research:
5 Broker-Friendly Stocks to Beat Market Blues
The ongoing earnings season has unveiled a rosy picture so far with many companies reporting better-than-expected earnings. According to the latest Earnings Preview, 78.6% of the 341 S&P 500 companies that have reported thus far have outperformed earnings estimates.
This is highly encouraging as an earnings beat generally leads to stock price appreciation. Investors like to add outperformers to their portfolios, which can fetch them handsome returns.
Markets Narrate a Different Story
Despite the impressive Q4 performance, the U.S. equity market has been witnessing a roller coaster ride. Both the Dow as well as the S&P 500 entered into the correction territory on Feb 9, down more than 10% from the all-time high reached in January.
The steep sell-off was due to stronger-than-expected job additions along with fastest wage growth in more than eight years. These factors, in turn, triggered fears of inflation and bolstered expectations that the Fed could take a more aggressive stance in hiking rates than previously expected.
The heightened volatility is reflected in the significant increase in the CBOE Volatility Index (VIX)
Proper Guidance - A Must in this Scenario
With market participants gripped by fears on the one hand and robust earnings numbers on the other, selecting potential winning stocks is a difficult task.
Furthermore, with a huge number of stocks available in the market at any point of time, spotting potential outperformers is by no means an easy task for individual investors. In the absence of proper guidance, identifying a winning stock is akin to searching for ‘a needle in a haystack’.
Additionally, with time at a premium these days, it is next to impossible for investors to go through the extensive process. Given this backdrop, it is in the best interest of investors to seek guidance from “experts in the field." The concerned experts are brokers.
Broker Advice to the Rescue
The “experts” in the field of investing are brokers who are equipped with detailed knowledge about the space. Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its prospects than individual investors.
To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Broker opinion should thus act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
Earnings Estimate Revisions
Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. The estimate revisions serve as an important pointer regarding the price of a stock.
For example, an earnings beat by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price while formulating their investment strategy.
The above write-up clearly suggests that by following broker actions, one can arrive at a winning portfolio of stocks. Keeping this in mind, we have designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions to earnings estimates over the last four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it has been included. The price/sales ratio takes care of the company’s top line, making the strategy effective.
And that's what we're screening for today…
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/292121/5-brokerfriendly-stocks-to-beat-market-blues
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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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
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Contact: Jim Giaquinto
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