U.S. stock markets record-breaking bull run of 2019 came to a halt in January thanks to the outbreak of deadly coronavirus in China. Several economists are of the opinion that it may delay global economic recovery. Consequently, the Dow 30 and the S&P 500 indexes dropped 1% and 0.2%, respectively in the last month while the Nasdaq Composite gained nearly 2%.
Wall Street resumed its rally with the commencement of February. All three major stock indexes ended in positive territory in the first four trading days of this month. The rally was driven by optimism regarding development of new vaccines that can contain the deadly coronavirus. Moreover, recently released strong economic data of January bolstered investor sentiments.
At this stage, wouldn’t it be a safer strategy to look for stocks that are winners currently and have the potential to gain further?
Sounds good? Here’s how to execute it:
One should primarily target stocks that have recently been on a bull run. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously witnessing an uptrend, there must be a solid reason or else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters to create a successful investment strategy.
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.
Just these few criteria have narrowed down the search from over 7,700 stocks to just nine.
Here we present five stocks out of the nine:
Sharps Compliance Corp. SMED is a leading provider of cost-effective disposal solutions for small quantity generators of medical waste. Its flagship product, the Sharps Disposal by Mail System, is a cost-effective and easy-to-use solution to dispose of medical waste.
The stock price has jumped 19.5% in the past four weeks. The company has an expected earnings growth rate of 800% for the current year (ending June 2020). The Zacks Consensus Estimate for the current year has improved 50% over the past 30 days.
Daqo New Energy Corp. DQ manufactures and sells polysilicon to photovoltaic product manufactures in China. It offers ready-to-use polysilicon and packaged to meet crucible stacking, pulling and solidification products.
The stock price has climbed 12.7% in the past four weeks. The company has an expected earnings growth of 326.3% for the current year. The Zacks Consensus Estimate for the current year has improved 4.2% over the past 30 days.
Forterra Inc. FRTA manufactures and sells pipe and precast products in the United States, Canada, and Mexico. It operates through Drainage Pipe & Products and Water Pipe & Products segments.
The stock price has gained 12.4% in the past four weeks. The company has an expected earnings growth rate of 680% for the current year. The Zacks Consensus Estimate for the current year has improved by 141.7% over the past 30 days.
SYNNEX Corp. SNX provides business process services in the Americas, Asia-Pacific, Europe and Africa. It operates in two segments — Technology Solutions and Concentrix.
The stock price has surged 10.6% in the past four weeks. The company has an expected earnings growth rate of 5.4% for the current year (ending November 2020). The Zacks Consensus Estimate for the current year has improved 5.8% over the past 30 days.
Citizens Financial Services Inc. CZFS provides various banking products and services for individual, business, governmental and institutional customers in the United States.
The stock price has advanced 6.3% in the past four weeks. It has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for the current year has improved 10.9% in the past 30 days.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
Click here to sign up for a free trial to the Research Wizard today.
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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FORTERRA INC (FRTA) : Free Stock Analysis Report
DAQO New Energy Corp. (DQ) : Free Stock Analysis Report
SYNNEX Corporation (SNX) : Free Stock Analysis Report
Sharps Compliance Corp (SMED) : Free Stock Analysis Report
Citizens Financial Services Inc. (CZFS) : Free Stock Analysis Report
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