5 Stocks to Keep Tabs on Post Recent Broker Upgrade
Zacks Investment Research | Dec 16, 2021 11:25PM ET
Notwithstanding the emergence of new variants of COVID-19, the U.S. stock market has had a solid run in 2021. This year’s trading is in its last leg, with only a few days of the last month remaining. Year to date, the major stock indexes, such as the Dow, the S&P 500 and the Nasdaq Composite have rallied 17.3%, 24.3% and 17.8%, respectively.
Investors would like to take advantage of this impressive stock market performance and add suitable promising stocks to their respective portfolios for handsome returns. However, with multiple stocks flooding the market, it is quite a daunting task for an individual investor to add appropriate stocks to the portfolio.
Consequently, seeking advice from experts in the field of investment is prudent.
Who Are the Experts & Why
The “experts” in the field of investment are brokers. They are equipped with detailed 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.
Estimate revisions by brokers serve as an important pointer regarding the price of a stock. In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
Winning Strategy
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 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.
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 eliminates the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
Boise, ID-based Boise Cascade (NYSE:BCC) Company https://www.zacks.com/performance .
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