Brokers Currently Love These 5 Stocks: Do You?

With a plethora of earnings reports flooding the market during the reporting cycle, pinpointing outperformers or well-performing stocks is by no means an easy task for individual investors. In the absence of proper guidance, identifying a winning stock is akin to searching for ‘a needle in a haystack’, for an investor. The proper guidance, in this respect, comes from brokers, who are deemed experts, equipped with vast knowledge and know how as far the field of investing is concerned.

Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide unbiased opinion to investors after thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.

Brokers, not only scrutinize the publicly available financial documents, but also attend company conference calls and other presentations. Naturally, it is in the best interest of investors to pay heed to such well-researched information as they aim to generate maximum returns from their portfolio. Estimate revisions serve as an important pointer regarding the price of a stock.

We have designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions to 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 has also been included. The price/sales ratio takes care of the company’s top line thereby making the strategy foolproof.

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 four 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 four 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 criterion are in the 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 takes out the ADR and Canadian stocks.

Here are five of the 10 stocks that made it through the screen:

Mammoth Energy Services (NASDAQ:TUSK) is an oilfield services provider with a variety of equipment, maintenance, and engineering and construction offerings to the energy sector. The stock carries a Zacks Rank #3 (Hold). The company has outshined the Zacks Consensus Estimate for earnings in two of the trailing four quarters. The average beat is 31.1%.

Ashford Hospitality Trust (NYSE:AHT) is based in Dallas, TX. The company is an externally-advised REIT focused on investing in the hospitality industry. Ashford sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for the current year has improved 13.9% over the past 60 days. You can see Original post

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Written By: Zacks Investment Research