Yahoo Finance 5 Best Investment Opportunities Using Relative Price Strength
As we close out the first quarter of 2023, the U.S. stock markets are desperately trying to defy the banking sector turmoil across the globe and the threat of a recession. Moreover, with inflation appearing to be more stubborn than previously expected, the Federal Reserve stuck to its plot and raised interest rates by another 25 basis points last week. This brings the Fed funds rate range to 4.75-5.00% — the highest level since 2007.
With the latest CPI and PPI reports both showing inflation on a downward trajectory and down quite a bit from their summer highs last year, the central bank signaled an end to interest rate increases. Nevertheless, continued worries over the regional banking system and the fallout from the forced UBS-Credit Suisse tie-up means that volatile trading in U.S. stocks is expected to continue for some time.
In the current jittery market environment, investors who might want to stay exposed to the equity setup should 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
Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential for determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.
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 five stocks that made it through the screen:
Playa Hotels & Resorts N.V. PLYA: This is a hotel operator in Mexico and the Carribean. The 2023 Zacks Consensus Estimate for Fairfax, VA-based PLYA indicates 12% year-over-year earnings per share growth. Playa Hotels & Resorts has a VGM Score of B.
Over the past 30 days, Playa Hotels & Resorts saw the Zacks Consensus Estimate for 2023 move up 16.7%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters. PLYA shares have edged up 1.5% in a year.
Reliance Steel & Aluminum Co. RS: Reliance Steel is a leading metals service center company engaged in value-added materials management and metals processing services. Over the past 60 days, this Los Angeles, CA-based firm saw the Zacks Consensus Estimate for 2023 move up 17.3%. RS has a VGM Score of B.
Reliance Steel beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 13.4%, on average. RS shares have increased 38.7% in a year.
Tecnoglass TGLS: The firm produces, sells and installs architectural glass and related aluminum products for residential construction markets. The 2023 Zacks Consensus Estimate for Colombia-based Tecnoglass indicates 15.4% year-over-year earnings per share growth. TGLS has a VGM Score of B.
Tecnoglass beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 21.5%, on average. The TGLS stock has gained 49.8% in a year.
Par Pacific Holdings, Inc. PARR: Par Pacific is a leading oil refiner and marketer. Over the past 30 days, this Houston, TX-based firm saw the Zacks Consensus Estimate for 2023 move up 5%. PARR has a VGM Score of A.
Par Pacific beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 16.1%, on average. PARR shares have rocketed around 128.5% in a year.
Betterware de Mexico S.A.P.I. de C.V. BWMX: The Mexico-based company operates in the household products direct-to-consumer space. The 2023 Zacks Consensus Estimate for this firm indicates 52% year-over-year earnings per share growth. BWMX has a VGM Score of A.
Betterware de Mexico saw the Zacks Consensus Estimate for 2023 move up 6.4% over the past 60 days. It has a trailing four-quarter earnings surprise of roughly 39.7%, on average. BWMX shares have lost 38.5% 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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Reliance Steel & Aluminum Co. (RS) : Free Stock Analysis Report
Tecnoglass Inc. (TGLS) : Free Stock Analysis Report
Par Pacific Holdings, Inc. (PARR) : Free Stock Analysis Report
Playa Hotels & Resorts N.V. (PLYA) : Free Stock Analysis Report
Betterware de Mexico SAPI de C (BWMX) : Free Stock Analysis Report
