4 Stocks With Relative Price Strength for Volatile Times

The Fed’s latest move to raise its core interest rate by another 0.75% has cast a pall over the stock market. It led to a precipitous drop in the equity indices on Thursday — marking the third consecutive day of declines and falling to lows not seen since July. With this, the Fed Fund rate jumped to the range of 3-3.25% from a mere 0-0.25% in early March. The central bank has hiked the interest rate by 3% so far in 2022.

What stands out is that rates may not have peaked yet, and more toughness could be in store for the remainder of this year and 2023. This is because attempts are being made to cool the 40-year high inflation and prevent it from becoming entrenched.

As such, trading is expected to be choppy for the U.S. stock markets going ahead, even as investors have been witnessing extreme volatility since the beginning of 2022. Risks stemming from recession fears, geopolitical tensions and dwindling liquidity may also lead to a rough road for equities.

In the current jittery market environment, for investors who might want to stay exposed to the equity setup, it is time to focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.

Relative Price Strength Strategy

Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.

Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.

However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.
 
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.

Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.

Screening Parameters

Relative % Price change – 12 weeks greater than 0

Relative % Price change – 4 weeks greater than 0

Relative % Price change – 1 week greater than 0

(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)

% Change (Q1) Est. over 4 Weeks greater than 0: Positive current-quarter estimate revisions over the last four weeks.

Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.

Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.

VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.

Here are the four stocks that made it through the screen:

HF Sinclair DINO: HF Sinclair is a producer and marketer of gasoline, diesel fuel and other specialty products. The 2022 Zacks Consensus Estimate for the Dallas, TX-based firm indicates 817.1% year-over-year earnings per share growth. DINO has a VGM Score of A.

HF Sinclair beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of 710.1%, on average. DINO shares have gained 61.6% in a year.

Marathon Petroleum MPC: Based in Findlay, OH, the company is a leading independent refiner, transporter and marketer of petroleum products. MPC’s expected EPS growth rate for three to five years is currently 23%, which compares favorably with the industry's growth rate of 10.6%. Marathon Petroleum has a VGM Score of A.

Notably, Marathon Petroleum beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 56.7%, on average. MPC shares have gone up 55.3% in a year.

Unum Group UNM: Along with disability insurance, Unum Group provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services. The 2022 Zacks Consensus Estimate for this Chattanooga, TN-based firm indicates 40.5% year-over-year earnings per share growth. UNM has a VGM Score of A.

Unum beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 30.1%, on average. UNM shares have gained 66.1% in a year.

Murphy USA MUSA: Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States. The 2022 Zacks Consensus Estimate for the El Dorado, AR-based firm indicates 61.5% year-over-year earnings per share growth. MUSA has a VGM Score of B.

Murphy USA beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 49%, on average. MUSA shares have gained 68.5% in a year.

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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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Unum Group (UNM) : Free Stock Analysis Report
 
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
 
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
 
HF Sinclair Corporation (DINO) : Free Stock Analysis Report
 
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