5 Broker-Loved Stocks to Keep an Eye on in the Current Scenario
The U.S. equity markets are in good shape driven by the artificial intelligence rally. The tech-heavy Nasdaq Composite gained 18.1% in the year’s first half. The S&P 500 gained 14.5%, while the tech-light Dow Jones index appreciated only 3.8%. The decline in inflation is another major tailwind. The annual inflation rate in the United States slowed to 3.3% in May 2024, the lowest in three months compared to 3.4% in April.
Given this improving scenario, investors would like to design a winning portfolio of stocks for healthy returns. However, with many stocks present in the market at any point, spotting potential outperformers is tough for individual investors. In the absence of proper guidance, identifying a winning stock is akin to searching for a needle in a haystack. Given this backdrop, it is in the best interest of investors to seek guidance from “experts in the field.” The concerned experts are brokers. Brokers have a deeper insight into what’s happening in a particular company along with a better understanding of the overall sector and the industry.
Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions in earnings estimates over the past 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 more effective.
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).
Price-to-Sales = Bot%10 (The lower the ratio, the better. Companies meeting this criterion 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 $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 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:
Air Transport Services (NASDAQ:ATSG) is being well-served by initiatives to modernize and expand its fleet. The company expects to end 2024 with 137 aircraft (118 freighters and 19 passenger planes) in service compared with 129 at 2023-end. We are also impressed by the company’s efforts to reward its shareholders through buybacks.
Over the past 60 days, the Zacks Consensus Estimate for ATSG’s current-year earnings has remained steady at 73 cents per share. ATSG currently carries a Zacks Rank #3 (Hold).
Allegiant Travel (NASDAQ:ALGT) is gaining from the buoyant air travel demand scenario. Efforts to upgrade its fleet are praiseworthy as well. The fleet size was 126 at 2023-end. ALGT aims to expand its fleet size to 126 at the end of 2024.
ALGT’s earnings surpassed estimates in three of the last four quarters (missing the mark once). The average beat is 29.31%. Allegiant currently carries a Zacks Rank #3.
New York-based ABM Industries (NYSE:ABM) is a provider of integrated facility solutions in the United States and other countries. ABM currently carries a Zacks Rank #3. The company has an impressive surprise history, with its earnings surpassing the Zacks Consensus Estimate in three of the last four quarters (missing the mark on the other occasion), the average beat being 7.3%.
The company’s comprehensive transformational initiative called 2020 Vision has helped it attain long-term profitable growth through an industry-based go-to-market approach. The multi-year comprehensive strategic plan, ELEVATE is expected to accelerate ABM’s organic growth, improve its strategic and comprehensive positioning, and reinforce profitability.
American Axle (NYSE:AXL) is a supplier of driveline and drivetrain systems, modules, and components for the automotive market. American Axle’s efforts to diversify its business, products, and customer base are generating impressive results. Optimization of its portfolio via buyouts is enhancing the firm’s position.
The Zacks Consensus Estimate for AXL’s 2024 earnings is currently pegged at 40 cents per share, indicating a 14.3% upward revision over the past 60 days. AXL’s earnings surpassed estimates in three of the last four quarters (missing the mark once). The average beat is 404.7%. American Axle currently sports a Zacks Rank #1.
Warner Bros. Discovery (NASDAQ:WBD) benefits from impressive streaming subscriber growth, driven by an expanding content portfolio. The company’s focus on sports streaming, particularly live sports, is a further tailwind.
WBD currently carries a Zacks Rank #3. The Zacks Consensus Estimate for WBD’s 2025 earnings has been revised upward over the past 60 days by more than 100%.
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.
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