During an earnings season, market sentiment is largely influenced by corporate results and guidance. Though earnings performance is a good enough indicator of a stock's future performance, identifying future growth drivers is not always an easy task. A company's better-than-expected earnings may not always translate to a solid price appreciation for its stock due to some reasons that are not easy to identify.
Therefore, it is wise to depend on expert advice. One way to do this is to follow broker recommendations.
Brokers have a better understanding of stocks, deeper industry knowledge and a grasp over the economy at large. They scrutinize the company's fundamentals and place them against the current economic backdrop to find out how the stock will fare as an investment option.
Brokers go through the company's publicly available documents, attend conference calls and are in direct communication with the top management. At times, to get more insight into the company's products and services offered, they even communicate with customers.
After an in-depth research, brokers decide to rate the company's stock. So, when an analyst upgrades a stock, you can easily rely on it.
Still solely depending on analyst recommendations is not the right way to build your investment portfolio. You should also take into consideration certain other factors to ensure solid returns.
Here we have a screening strategy that should help you find potential winners:
Broker Rating Upgrades (4 weeks): The screen chooses those stocks that have witnessed broker upgrades over the last four weeks.
Current Price greater than or equal to 5: The stocks must be trading at $5 or above.
Average 20-day Volume greater than 100,000: A large trading volume ensures that the stock is easily tradable.
Zacks Rank equal to #1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven record of success.
VGM Score less than or equal to B: Our research indicates 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.
5 Stocks to Buy Now
Here are five of the 15 stocks that made it through the screen:
Hancock Holding CompanyHBHC is a bank holding as well as financial holding company. The company boasts a strong surprise history, with a trailing four-quarter beat of 33.2%.
Universal Forest Products Inc.UFPI engineers, manufactures, treats, distributes and installs lumber, composite wood, plastic and other building products. Over the trailing four quarters, the company delivered an average surprise of 12.1%.
WEX Inc.WEX offers physical, digital and virtual corporate card payment solutions. Over the trailing four quarters, the company delivered an average earnings surprise of 3.9%.
Cooper-Standard Holdings Inc.CPS operates as a supplier of systems and components for the automotive industry. The company also boasts a strong surprise history, with a trailing four-quarter beat of 51.2%.
B&G Foods Inc.BGS and its subsidiaries manufacture, sell and distribute a diversified portfolio of high-quality, shelf-stable foods. The company has a strong surprise history, with a trailing four-quarter beat of 10.9%.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.