5 Broker-Favorite Stocks to Keep a Close Watch on
That unprecedented volatility has gripped the U.S. market is an understatement. Factors like rising costs and sky-high inflation induced the Fed to aggressively tighten its monetary policy. Moreover, the oil price surge, mainly due to supply concerns emanating from the prolonged Russia-Ukraine war, also contributed to the market rout this year. As a result of the market mayhem, the S&P 500 — regarded as one of the finest reflections of the stock market as a whole — has declined 15.7% so far this year.
However, the erratic market behavior does not mean that investors should shun equities. So what’s the way forward? One way is to follow the action of brokers, who are considered experts in the field of investing. In this regard, stocks like American Airlines AAL, Builders FirstSource BLDR, Caleres CAL, Casey’s General Stores CASY and Commercial Metals Company CMC should be on an investors’ watchlist.
Brokers go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers follow the stocks under their coverage in great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Estimate revisions serve as an important pointer in determining the stock price. Naturally, paying heed to such well-researched information is a prudent choice for individual investors as they want to generate handsome returns from their portfolio of stocks, irrespective of the surrounding market conditions.
To take care of the earnings performance, we designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
Revenue Performance Not to be Overlooked
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance. Therefore, one must take the top-line performance into consideration as well while formulating a winning strategy. We included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
# (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 eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that passed the screen:
American Airlines is based in Fort Worth, TX. The gradual increase in air-travel demand (particularly for leisure) is aiding AAL. However, high fuel costs are hurting the bottom line.
Over the past 60 days, the AAL stock has seen the Zacks Consensus Estimate for 2022 earnings being revised 61.1% upward. AAL currently carries a Zacks Rank #3 (Hold).
Builders FirstSource, based in Dallas, TX, manufactures and supplies building materials. BLDR has been benefiting from its focus on cost-management practices, strategic acquisitions and robust demand for a while, driven by solid housing, and repair and remodeling activities.
Builders FirstSource continues to focus on investing in innovations and enhancing digital solutions for its customers. BLDR currently carries a Zacks Rank of 3. The Zacks Consensus Estimate for BLDR’s current-year earnings has been revised 19.4% upward over the past 60 days.
Caleres : Caleres, currently sporting a Zacks Rank #1 (Strong Buy), is a leading footwear retailer and wholesaler in the United States, China, Canada, China and Guam. CAL operates through Famous Footwear and Brand Portfolio segments. This Saint Louis, MO-based player steadily benefits from positive consumer demand trends and an accelerated recovery in the footwear marketplace, which continue to aid its sales. The momentum in the Famous Footwear brand is expected to contribute meaningfully to sales growth.
Caleres has an excellent surprise history with its earnings having surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 62.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Casey’s General Stores is one of the leading convenience store retailers in the United States with a strong brick-and-mortar footprint. The acquisition of Buchanan Energy, completed last year, is an added positive as it supplemented 94 retail stores and 79 dealer locations to CASY’s business. CASY’s self-distribution model and strength in Prepared Food business also bode well.
Casey’s is currently Zacks #3 Ranked. Shares of CASY have gained 11.2% over the past three months. The Zacks Consensus Estimate for CASY’s current-quarter earnings has been revised 7.48% upward over the past 60 days.
Commercial Metals presently has a Zacks Rank of 1 and an expected earnings growth rate of 147.9% for the current fiscal year. The consensus estimate for CMC’s current-quarter earnings has been revised 7.5% upward over the past 60 days.
Commercial Metals’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the mark once. CMC has a trailing four-quarter earnings surprise of roughly 16%, on average. Shares of CMC have gained around 20% over the past six months.
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 backtest 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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Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
Commercial Metals Company (CMC) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Casey’s General Stores, Inc. (CASY) : Free Stock Analysis Report
Caleres, Inc. (CAL) : Free Stock Analysis Report
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