5 Broker-Friendly Stocks To Combat Trade & Geopolitical Woes
Zacks Investment Research | Jun 27, 2019 09:39PM ET
Concerns of global economic sluggishness owing to the trade war between the United States and China and tensions with the likes of Iran and North Korea have hurt the broader equity market on various occasions this year.
However, irrespective of market conditions, investors strive to design a winning portfolio of stocks. They, after all, are putting their hard-earned money into stocks. Amid the prevalent confusion, it is almost impossible for individual investors to come up with a winning portfolio of stocks without proper guidance. Therefore, it is in the best interest of investors to seek advice from “experts in the field."
Who Are These Experts?
The “experts” in the field of investing are brokers who are equipped with thorough knowledge about the space. Brokers, irrespective of their types (sell-side, buy-side or independent), have at their disposal a lot more information on a company and its prospects than individual investors.
To attain their objective, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Broker opinion should thus act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
Direction of Earnings Estimates Serves as a Proper Guide
Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Naturally, their estimate revisions serve as an important pointer regarding the price of a stock.
For example, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price while formulating their investment strategy.
To take care of the earnings performance, we have designed a screen based on improving broker recommendation and upward estimate revisions over the last four weeks.
Do Not Ignore the Top Line
However, designing a strategy based solely on the bottom line is unlikely to result in a winning approach. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds. To address top-line concerns, we have included in our screen price/sales ratio, which serves as a strong complementary valuation metric.
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).
Get The News You Want
% 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 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:
Brentwood, TN-based Delek US Holdings (NYSE:DK) is an independent refiner, transporter and marketer of petroleum products. The Zacks Consensus Estimate for Delek US Holdings’ current-year earnings has been revised upward to the tune of 22.6% over the past 60 days. The company currently carries a Zacks Rank #2 (Buy). You can see Zacks Investment Research
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