5 Stocks Flying High Following Recent Upgrade by Analysts

With the second-quarter 2021 earnings season in the offing, investors will look to include a winning basket of stocks in their respective portfolios, which have the potential to surpass earnings expectations in the to-be-reported quarter. This is because an earnings beat more often than not leads to stock price appreciation.

Investors after all are parking out their hard-earned money in the stock market. Naturally, they will want to generate handsome returns for their portfolio. However, the task of designing one’s portfolio with potential outperformers is anything but easy. In fact, equity market tricks are not easy to master with a plethora of stocks flooding the space at any point of time. The task becomes even more difficult when one tries to select a promising portfolio without proper guidance.

A handful of inappropriate stocks can adversely impact his/her returns, thereby ruining the very objective of investing the hard-earned money in the highly unpredictable stock market.

h3 Broker Advice: The Way Forward?/h3

To avoid such a predicament, investors, more often than not rely on the guidance provided by brokers who are deemed experts in the field equipped with thorough knowledge and a clear insight into the nitty gritties of the investment world.

They have at their disposal a lot more information about a company and its prospects than individual investors. Brokers directly communicate with the top management. They also thoroughly study the publicly available documents and attend conference calls. Since brokers meticulously follow the stocks under 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.

h3 Winning Strategy/h3

The above write-up clearly suggests that by following broker actions, one can arrive at an attractive portfolio of stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward revisions of 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 is included. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.

h3 Screening Criteria/h3

# (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 made it through the screen:

Caleres (NYSE:CAL) Zacks Investment Research

Written By: Zacks Investment Research