The U.S. stock market is likely to continue experiencing volatility, driven by ongoing uncertainty over trade policies, economic challenges and shifting investor sentiment. Even though the 90-day extension to the pause in higher tariffs against China serves as a breather, the lack of clarity on the tariff front means that volatility is unlikely to go away soon.
This climate of uncertainty poses a significant challenge for investors seeking the right stocks to generate solid returns. A practical approach is to consider broker recommendations, as brokers are regarded as experts with in-depth knowledge of market intricacies. By taking this approach, broker-backed stocks such as American Axle & Manufacturing AXL, Brookdale Senior Living (BKD), Adient ADNT, Asbury Automotive ABG and AutoNation AN emerge as attractive options to consider for promising 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).
Here are five of the 10 stocks that made it through the screen:
American Axle & Manufacturing: Its considerable strides and collaborations in the electric drive space and efforts to optimize its portfolio bode well for top- and bottom-line growth. Frequent business wins augur well for American Axle’s prospects. AXL recently won several contracts, underscoring its strength in both electric and Internal Combustion Engine markets.
