"In the stock game, winning means reaching a higher price." However, striking the right chord each time needs a fair amount of luck.
No matter how disciplined and systematic investors are, equity market volatility will always manage to get the better of them. While a few lucky ones rake in the moolah, others fall victim to ad hoc strategies.
One could resort to commonly used techniques to find beaten down stocks that have the potential to recover faster than others. However, even such investment choices bear the risk of disappointment. Particularly, one could fall into the value trap if the hidden weaknesses in selected stock are not identified.
So, 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.
Average Broker Rating 1 or 2: 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 narrowed down the universe from over 7,700 stocks to just 30.
Here we present five stocks out of those thirty:
Skechers U.S.A. Inc. SKX designs, develops, markets and distributes footwear for men, women, and children; and performance footwear for men and women under the Skechers GO brand worldwide. It operates through three segments: Domestic Wholesale Sales, International Wholesale Sales, and Retail Sales.
The company's stock price has advanced 28.8% in the past four weeks. It has expected earnings growth of 15.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 9.4% over the last 60 days.
SSR Mining Inc. SSRM engages in the acquisition, exploration, development and operation of precious metal resource properties in the Americas. The company primarily explores for gold and silver deposits.
The company's stock price has surged 18% in the past four weeks. It has expected earnings growth of 69.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 11.4% over the last 60 days.
Och-Ziff Capital Management Group Inc. OZM provides investment advisory services for its clients. It primarily caters to institutional investors, which include pension funds, fund-of-funds, foundations and endowments, corporations and other institutions, private banks and family offices.
The company's stock price has risen 16.6% in the past four weeks. It has expected earnings growth of 110.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 9.3% in the last 60 days.
Hasbro Inc. HAS is a global play and entertainment company offering the World's Best Play Experiences. From toys and games to television, movies, digital gaming and consumer products, Hasbro offers a variety of ways for audiences to experience its iconic brands.
The company's stock price has increased 15.6% in the past four weeks. It has expected earnings growth of 17.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 60 days.
Energy Recovery Inc. ERII provides energy solutions to industrial fluid flow markets under the ERI, PX, Pressure Exchanger, PX Pressure Exchanger, AT, AquaBold, VorTeq, MTeq, IsoBoost, and IsoGen names. It operates through Water and Oil & Gas segments.
The company's stock price has advanced 15.1% in the past four weeks. It has expected earnings growth of 15% for the current year. The Zacks Consensus Estimate for the current year has improved by 15% in the last 60 days.