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Top Stocks with Big Potential Catch-Up Moves - Screen of the Week
1/2/2013 12:12:00 AM
Given the recent run-up in the market, here's a screen I've been using recently for my own stock picking.
First, it focuses on the top Zacks Ranked Sectors and Industries. Then it focuses on the Zacks Rank #1s, #2s and #3s, which are Strong Buys, Buys and Holds, respectively. But then it selects the outperforming stocks with the smallest percentage price change over the last 4 weeks.
Why would I do something like that?
You've probably heard the old adage that roughly half of a stock's price movement can be attributed to the group that it's in. And that's true. In fact, oftentimes, even a mediocre stock in a top group will outperform a top stock in a poor group for this very reason.
Now, take a look at any top group. You'll see plenty of fantastic stocks with some impressive price gains in there. But not every stock in every group moves in lockstep at the exact same time. Some will move more than others at any given time.
So by focusing on the stocks with the smallest percentage price change with fundamentals that are just as good as those making the biggest price change, you might find yourself getting into the stocks ready to make the biggest potential catch-up move.
Here's how to set up that screen:
So each one of these stocks is in a top Sector and top Industry within that Sector. This alone will tip the odds of success in your favor by a great deal when you consider that the best Zacks Ranked groups outperform the worst ones by a factor of 4 to 1.
Then by selecting those stocks with the best Zacks Rank along with the best price performance over the last 4 weeks, you now have only a list of winners from which to choose from.
And from that list of winners, we're selecting the ones that have gained less than their peers on that list. Remember, these stocks aren't 'dogs' or unresponsive stocks. Quite the contrary; they have all outperformed the market. It just so happens that they increased less than the others on the list. But because they are a top rated stock in a top rated industry, we've singled these out as the ones that could make the biggest move to 'catch-up' to the others.
It's an interesting screen that has generated a lot of great names.
Here are 5 from that list:
ADS - Alliance Data Systems Corp.
GIL - Gildan Activewear Inc.
LGF - Lions Gate Entertainment Corp.
RGEN - Repligen Corp.
WRLD - World Acceptance Corp.
All great looking stocks that seem to have lots more upside in store for them.
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.
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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.
Disclosure: Performance information for Zacks' portfolios and strategies are available at: http://www.zacks.com/performance .
ALLIANCE DATA (ADS): Free Stock Analysis Report
GILDAN ACTVWEAR (GIL): Free Stock Analysis Report
LIONS GATE ETMT (LGF): Free Stock Analysis Report
REPLIGEN (RGEN): Free Stock Analysis Report
WORLD ACCEPTANC (WRLD): Free Stock Analysis Report
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