The U.S. Federal Reserve cut interest rates for the first time in the current year. The 25-basis-point rate cut was widely expected and signals a shift toward monetary easing. The Fed expects two more rate cuts by year-end.
Although inflation remains above the Federal Reserve’s 2% target, the uptick in the unemployment rate has increased pressure on policymakers to shift focus from containing inflation toward supporting growth. The central bank raised its projections for economic growth this year, with higher growth anticipated next year. Investors would like to capitalize on this improving scenario by designing their portfolios accordingly.
One way to fulfill the objective would be to follow broker advice, as they are considered experts in the field of investing. Thus, keeping an eye on broker-adored stocks like CVR Energy CVI, Asbury Automotive Group ABG, American Axle & Manufacturing Holdings AXL, General Motors Company GM and Adient plc ADNT for healthy returns seems to be prudent.
We have designed a screen to shortlist stocks based on improving analyst recommendations and upward estimate revisions over the last 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.
Screening Parameters
# (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).
Here are five of the 10 stocks that made it through the screen:
Established in 2006, CVR Energy is a holding company primarily involved in renewable energy, petroleum refining, marketing and nitrogen fertilizer manufacturing through its stake in CVR Partners. It is committed to developing renewable biofuels and actively participating in the energy transition to reduce carbon emissions.
