5 Relative Price Strength Stocks You Can't Ignore

Nilanjan Choudhury
·6-min read

The novel coronavirus outbreak triggered an unprecedented sell-off in equities and bonds. Stocks were clobbered and major indices crashed regularly, while in a bizarre turn of events, the U.S. oil futures hit negative territory.

However, over the past few months, markets, securities and crude have rebounded off their pandemic lows. Restrictions have been loosened and the economy has reopened, with activity limping back toward normalcy. Meanwhile, certain drug candidates and treatments offer a ray of hope in the coronavirus fight.  

While the heaviest losses may be in the rear-view mirror, with the S&P 500 and the tech-heavy Nasdaq even attaining their all-time highs earlier this month, the road to recovery remains long and uncertain amid concerns about a fresh wave of the virus in many countries, the Fed’s cautious view of the American economy, the upcoming election-related uncertainty and simmering U.S.-China tensions.

Amid the entire coronavirus-induced mayhem, a few stocks held up to the crisis even as the virus knocked down businesses and industries. With the market expected to remain volatile over the near-to-medium term, one of the ways such potential plays could be identified is to look for signs of relative price strength.

The 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 important 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 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 (Strong Buy) 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 15 stocks that made it through the screen:

FedEx Corporation FDX: FedEx is the leader in global express delivery services. The FY 2021 Zacks Consensus Estimate for this Memphis, TN-based company indicates 52.8% earnings per share growth over FY 2020. FedEx has a VGM Score of B.

The Michaels Companies, Inc. MIK: A leading art and craft specialty retailer in North America, The Michaels Companies, has a VGM Score of A. Over 30 days, the Irving, TX-based company has seen the Zacks Consensus Estimate for FY 2021 surge 68%.

Lennar Corporation LEN: The Miami, FL based company is engaged in homebuilding and financial services in the United States. The firm has a VGM Score of B and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 33.36%, on average.

Aaron's, Inc. AAN: Aaron’s is a major omni-channel provider of lease-purchase solutions, mainly to underserved and credit-challenged customers. Sporting a VGM Score of A, this Atlanta, GA-headquartered company’s expected EPS growth rate for three to five years currently stands at 18.1%, comparing favorably with the industry's growth rate of 16.5%.

Casey’s General Stores, Inc. CASY: Founded in 1959 and headquartered in Ankeny, IA, Casey's General Stores is a fuel retailer and C-store operator in 16 Midwestern states. The company has a VGM Score of A and a good earnings surprise history, having surpassed estimates in three of the last four quarters and missing in the other, delivering a positive earnings surprise of 14.15%, 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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Aarons, Inc. (AAN) : Free Stock Analysis Report
 
FedEx Corporation (FDX) : Free Stock Analysis Report
 
Lennar Corporation (LEN) : Free Stock Analysis Report
 
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
 
The Michaels Companies, Inc. (MIK) : Free Stock Analysis Report
 
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