Markets

5 Stocks Stealing the Limelight Post Recent Analyst Upgrade

The primary aim of investors while designing a portfolio of stocks is to garner handsome returns. However, the task is easier said than done. With a plethora of stocks swamping the market at any point of time, chances are high for an investor to make a wrong choice while designing the portfolio in absence of proper guidance and expertise. Moreover, the time constraint that we all have to confront these days makes the task even more daunting. Picking unsuitable stocks can adversely impact his/her returns, thereby ruining the very objective of investing the hard-earned money in the highly unpredictable stock market.

This is where the knowledge of specialists comes in handy. Experts help investors design a portfolio that promises great returns. They are brokers in the field of investing with in-depth idea about the stock market. Brokers, irrespective of their types (sell-side, buy-side or independent), undertake a thorough research of the stocks covered by them.

To that end, they attend company conference calls, interview management personnel, minutely study the company’s publicly available documents among other things. Given such a background, it is no surprise that they are armed with an extensive know-how of the stocks in their portfolio(s). Evidently, it is in the best interests of investors to be guided by the “experts” in the field while making investment decisions (buy, sell or hold).

Making the Most of Broker Opinions

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 designed a screen to shortlist stocks based on improving analyst recommendations 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 is also included. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.

Screening Criteria

# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of the top 75 companies that have witnessed net upgrades over the last 4 weeks).

% change in Q (1) est. (4 weeks) = Top #10(This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter).

We have also added the following screening parameters to ensure that the strategy is a winning one:

Price-to-Sales = Bot%10(The lower the ratio the better, companies meeting this criteria are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio).

Price greater than $5 (as a stock trading below $5 will not likely create significant interest for most investors).

Average Daily Volume greater than 100,000 shares over the last 20 trading days(Volume has to be significant to ensure that these are easily traded).

Market value ($ mil) = Top #3000(This gives us stocks that are in the top 3000 in terms of market capitalization).

Com/ADR/Canadian= Com(This takes out the ADR and Canadian stocks).

Here are five of the 10 stocks that made it through the screen:

Based in Columbus, OH, Big Lots BIG along with its fully-owned subsidiaries is a broad-line closeout retailer in the United States. This currently Zacks Rank #2 (Buy) stock has witnessed the Zacks Consensus Estimate for current-year bottom line being revised 74.4% upward over the past 60 days.

Bed Bath & Beyond BBBY is a leading operator of specialty retail stores in the United States and Canada. This presently #2 Ranked stock’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters (missing the mark in the other two).

AAR Corporation AIR: The company, carrying a Zacks Rank of 2 presently, provides various products and services to the aviation and defense industries worldwide. The company’s earnings outperformed the Zacks Consensus Estimate in each of the last four quarters, the average being in excess of 100%.

Beazer Homes USA BZH is a leading national homebuilder, currently sporting a Zacks Rank #1 (Strong Buy). The company’s earnings outperformed the Zacks Consensus Estimate in three of the last four quarters, lagged estimates on one occasion. The average beat is in excess of 100%. . Youcan see the complete list of today’s Zacks #1 Rank stocks here.

Owens & Minor OMI operates as a healthcare solutions company in the United States and internationally. This currently Zacks #1 Ranked stock has witnessed the Zacks Consensus Estimate for current-year earnings being revised 66.4% upward over the past 60 days.

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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: https://www.zacks.com/performance


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Owens Minor, Inc. (OMI): Free Stock Analysis Report
 
Big Lots, Inc. (BIG): Free Stock Analysis Report
 
Bed Bath Beyond Inc. (BBBY): Free Stock Analysis Report
 
AAR Corp. (AIR): Free Stock Analysis Report
 
Beazer Homes USA, Inc. (BZH): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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