Relative Price Strength Make These Stocks Attractive Picks

Nilanjan Choudhury
·5 min read

With Joe Biden taking office as the 46th president of the United States amid expectations of another round of economic stimulus, it is time to focus on good investment opportunities. As the economy gradually reopens and growth starts to rebound, one of the ways such potential winners could be identified is to look for signs of relative price strength.

The Relative Price Strength Approach

Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s important to measure the performance of such a stock relative to its industry or peers, or the appropriate benchmark.

If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance to provide considerable returns.

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 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.

Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results 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 five of the 18 stocks that made it through the screen:

Sunoco LP SUN: Sunoco is among the biggest motor fuel distributors in the United States wholesale market in terms of volumes. The 2021 Zacks Consensus Estimate for this Dallas, TX-based company indicates 47.9% earnings per share growth over 2020. Sunoco has a VGM Score of A.

KB Home KBH: A well-known homebuilder in the United States and one of the largest in California, KB Home has a VGM Score of B. Over 30 days, the Los Angeles-based company has seen the Zacks Consensus Estimate for fiscal 2021 improve 19.7%.

United States Cellular Corporation USM: The Chicago, IL-based company is one of the largest full-service wireless carriers in the United States. U.S. Cellular has a VGM Score of A and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 231.12%, on average.

Hibbett Sports, Inc. HIBB: Hibbett Sports is a major athletic-inspired retailer, located in small and mid-sized markets across the country. Sporting a VGM Score of A, this Birmingham, AL-headquartered company’s expected EPS growth rate for three to five years currently stands at 17%, comparing favorably with the industry's growth rate of 13.2%.

Domtar Corporation UFS: Founded in 1848 and headquartered in Fort Mill, SC, Domtar manufactures and distributes a wide array of fiber-based products including communication papers, specialty and packaging papers and adult incontinence products. The company has a VGM Score of B and an enviable earnings surprise history, having surpassed estimates in each of the last four quarters, delivering an earnings surprise of 163.30%, on average.

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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Sunoco LP (SUN) : Free Stock Analysis Report
 
Hibbett Sports, Inc. (HIBB) : Free Stock Analysis Report
 
United States Cellular Corporation (USM) : Free Stock Analysis Report
 
KB Home (KBH) : Free Stock Analysis Report
 
Domtar Corporation (UFS) : Free Stock Analysis Report
 
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