Volatility has been widely prevalent of late in the broader equity markets. Despite AI behemoth NVIDIA’s stellar quarterly performance, AI-bubble concerns continue to weigh on the market. Moreover, uncertainty remains whether the Federal Reserve will cut rates at its meeting next month.
The better-than-expected September jobs report, delayed due to the government shutdown, has further lowered expectations of a rate cut in December. In view of these factors, market movement has been hugely erratic. In this scenario, designing an appropriate portfolio for healthy returns is not an easy task for individual investors. So what is the way out?
One way could be to pay heed to advice from brokers. Brokers obtain valuable insights into companies by engaging directly with senior management, analyzing public disclosures and participating in earnings calls, which helps them provide well-informed recommendations to investors. Following this route, broker-adored stocks like Par Pacific Holdings PARR, BrightSpring Health Services BTSG,The Goodyear Tire & Rubber Company GT, American Airlines AAL and Allegiant Travel Company ALGT should be monitored for healthy returns.
We have designed a screen to shortlist stocks based on improving broker recommendations and upward revisions in earnings estimates over the past four weeks. Also, since the price/sales ratio is a strong complementary valuation metric in the presence of broker information, it has been included. The price/sales ratio takes care of the company’s top line, making the strategy a well-rounded one.
# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks).
% change in Q (1) est. (4 weeks) = Top #10 (This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter).
Price-to-Sales = Bot%10 (The lower the ratio, the better. Companies meeting this criterion are in the bottom 10% of our universe of over 7,700 stocks concerning this ratio).
Current Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days (Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization).
Com/ADR/Canadian= Com (This eliminates the ADR and Canadian stocks)
