The third-quarter earnings season is in its nascent stage. However, the start has been highly impressive, led by players from the Finance sector. The rosy beginning has propelled equity markets northward despite tariff-related woes and the prolonged government shutdown. Moreover, a weak labor market has raised expectations that the Fed will continue to reduce the benchmark lending rate during the rest of 2025, adding to investor enthusiasm.
Investors may aim to capitalize on this upward trend by creating a portfolio geared toward generating solid returns. However, with an overwhelming number of stocks available in the market at any given time, building a successful portfolio can be a challenging task for individual investors. One effective approach is to rely on broker recommendations, as brokers are considered industry experts with in-depth knowledge of market dynamics and intricacies. Following this route, broker-friendly stocks like Par Pacific Holdings PARR, Cooper-Standard CPS, Bread Financial BFH, American Airlines AAL and CVR Energy CVI 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.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio, the better, companies meeting this criteria are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization.
Com/ADR/Canadian= Com: This takes out the ADR and Canadian stocks.
