In the stock market, finding a win-win strategy is easier said than done. No matter how disciplined and systematic investors are, equity market volatility will always manage to get the better of them. While a few lucky ones rake in the moolah, others fall victim to ad hoc strategies.
One could take resort to the commonly used techniques to find beaten down stocks that have the potential to recover faster than others. But this bears the risk of disappointment as one could fall into the value trap if the selected stock’s hidden weakness is not identified.
In the stock game, winning means reaching a higher price. So, how about looking for the current winners that have the potential to gain further?
Sounds a good idea? Here is how to execute it:
One should primarily look for stocks that have recently witnessed a price increase. Actually, stocks that have recently seen price strength have high chances of carrying the momentum forward.
If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen like the losers. So, looking at stocks that have already won the game and are capable of beating the benchmark that they have set appears to be rational.
Nevertheless, recent price strength alone cannot do the trick. Club together other relevant parameters in your game plan to get the optimum return on your investment.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.
Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Here are eight of the 15 stocks that made it through this screen:
Gibraltar Industries, Inc. ROCK is a leading manufacturer, processor, and distributor of metals and other engineered materials for the building products, vehicular, and other industrial markets. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 67.30%.
John Bean Technologies Corporation JBT is a leading global solutions provider to the food processing and air transportation industries. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 17.98%.
IntraLinks Holdings, Inc. IL is a global provider of Software-as-a-Service solutions for securely managing content, exchanging critical business information and collaborating within and among organizations. The company surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion in the trailing four quarters. However, it has an average positive earnings surprise of 88.89%.
Willdan Group Inc. WLDN is a provider of professional technical and consulting services to utilities, private industry, and public agencies at all levels of government. The company surpassed the Zacks Consensus Estimate thrice while missing the same once in the trailing four quarters. It has an average positive earnings surprise of 18.72%.
NVE Corporation NVEC is a recognized leader in the practical commercialization of spintronics, which many experts believe represents the next generation of microelectronics. The company surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion in the trailing four quarters. It has an average positive earnings surprise of 8.77%.
Eagle Bancorp Montana Inc. EBMT operates as a holding company for American Federal Savings Bank that provides retail banking services in the south central portion of Montana. The company surpassed the Zacks Consensus Estimate thrice and missed it once in the trailing four quarters, with an average positive surprise of 19.35%.
Cutera Inc. CUTR designs, develops, manufactures and markets the CoolGlide family of products for use in laser and other light-based aesthetic applications. The company surpassed the Zacks Consensus Estimate thrice while missing the same on one occasion in the trailing four quarters. It has an average positive earnings surprise of 240.58%.
Kimball Electronics Inc. KE operates as a contract manufacturer of durable goods electronics. The company specializes in durable electronics for the medical, automotive, industrial and public safety markets. The company surpassed the Zacks Consensus Estimate twice while missing the same on two occasions in the trailing four quarters. However, it has an average positive earnings surprise of 11.87%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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