Credit: Shutterstock photoWith a deluge of stocks flooding the market at any point of time, investors might end up making a wrong choice while designing their portfolio in the absence of proper know-how.
Moreover, time constraint makes the task more difficult. Choice of improper stocks can adversely impact returns, thereby ruining the objective of investing hard-earned money in the highly unpredictable stock market.
Broker Advice - The Way Out
To avoid such confusion, investors, more often than not rely guidance provided by brokers- who are deemed to be experts in the field. The opinion of brokers is highly sought after by investors as they have a clear insight into the nitty gritty of the investment world. Individual investors, more often than not, do not have access to such detailed and well-researched information.
Out of the three types of brokers (sell-side, buy-side and independent) present, sell-side analysts are the most common. They are employed by various brokerage firms to provide unbiased opinion on stocks. Meanwhile, buy-side analysts are employed by hedge funds, mutual funds and others while independent analysts directly sell their reports to investors.
Brokers revise their earnings estimates after carefully examining the pros and cons of an event for the concerned stock. Naturally, their stock related actions (upgrade or downgrade) serve as an invaluable guide as far as fixing target price of stock (s) is concerned.
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 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 foolproof.
Screening Criteria
# (Up- Down Rating)/ Total (4 weeks) =Top #75 : This gives the list of 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.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10 : The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5 : 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 the top 3000 if one judges by 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:
Verso CorporationVRS : Founded in 2006 and headquartered in Miamisburg, OH, Verso is a leading North American producer of coated paper. This Zacks Rank #1 (Strong Buy) stock has seen the Zacks Consensus Estimate for current-year earnings being revised upward to the tune of a massive 105% over the last 60 days. You can see the complete list of today's Zacks #1 Rank stocks here .
Bed Bath & Beyond Inc. BBBY , an omnichannel retailer of domestics merchandise and home furnishings, carries a Zacks Rank #3 (Hold). The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 0.9% upward over the last 60 days.
American Airlines Group Inc.AAL operates more than 6,700 daily flights to over 330 destinations in more than 50 nations across the globe. This Zacks Rank #3 airline behemoth is headquartered in Fort Worth, TX. The company has an impressive history with respect to earnings per share. It outshined the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 2.3%.
Avis Budget Group Inc.CAR provides vehicle rental services through a network of approximately 10,000 car and truck rental locations in the United States, Canada, Australia, New Zealand, Latin America, the Caribbean, and parts of Asia. This Zacks Rank #3 stock has seen the Zacks Consensus Estimate for current-year earnings being revised 0.6% upward over the last 30 days.
Dillard's Inc. DDS is a large departmental store chain featuring fashion apparel and home furnishings. This Zacks Rank #3 stock has an impressive expected earnings per share growth rate of 9.7% for three to five years.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
Click here to sign up for a free trial to the Research Wizard today.
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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American Airlines Group Inc. (AAL): Free Stock Analysis Report
Avis Budget Group, Inc. (CAR): Free Stock Analysis Report
Verso Corporation (VRS): Free Stock Analysis Report
Bed Bath & Beyond Inc. (BBBY): Free Stock Analysis Report
Dillard's, Inc. (DDS): 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
