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5 Broker-Favorite Stocks to Tide Over the Market Tempest

Even though the better-than-expected inflation data for October came as a relief to U.S. stock markets, the situation is still far from out of the woods. In fact, most market watchers believe that further interest rate hikes remain in the pipeline. The Fed vowed to continue with its interest rate hiking strategy to curb high inflationary pressure, persisting at a 4-decade high.

Higher interest rates shoot up the cost of borrowing, escalating the chances of an economic slowdown. Intensifying the uncertain scenario are reports of fresh COVID deaths in China. This stoked fears of re-introduction of market restrictions, in turn hampering economic activities.

The resultant market volatility implies that it is very difficult for individual investors to design a winning portfolio of stocks. Choice of improper stocks can adversely impact his/her returns, thereby ruining the very objective of investing precious funds in the highly unpredictable stock market. So what’s the way forward? One way is to trust broker advice and have broker-favorite stocks like Country Healthcare CCRN, CVR Energy CVI, Delek US Holdings DK, Boise Cascade BCC and Builders FirstSource BLDR on one’s radar.

Why is Broker Advice Important?

As brokers indulge in extensive research on stocks under their coverage, they have access to much-detailed information on a company. To this end, they attend company conference calls/presentations and scrutinize every piece of document available in the public domain before instructing investors.

Since brokers meticulously follow the stocks in their coverage, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Naturally, their estimate revisions serve as a determining factor for the stock price.

Given this extensive know-how, brokers are deemed experts in the field of investing, equipped with thorough knowledge and a clear insight into the nitty-gritty of the investment world. Paying heed to such well-researched information is, therefore advisable for investors to avoid the unfortunate scenario of losing their hard-earned money parked in stock markets down the drain.

Leveraging Broker Knowledge

The above write-up clearly suggests that by following broker actions, one can arrive at a promising basket of stocks. Keeping this in mind, we designed a screen to shortlist stocks based on improving analyst recommendations and upward earnings estimate revisions over the last four weeks.

Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it is considered in designing a winning portfolio of stocks. The price/sales ratio takes care of a company’s top line, making the strategy extremely effective.

Screening Criteria

# (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 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 eliminates the ADR and Canadian stocks.

Here are five of the 10 stocks that made it through the screen:

Cross Country Healthcare is a national leader in providing innovative healthcare workforce solutions and staffing services. CCRN’s diverse client base includes both clinical and nonclinical settings, servicing acute care hospitals, physician practice groups, outpatient and ambulatory-care centers, nursing facilities, both public schools and charter schools, rehabilitation and sports medicine clinics, government facilities and homecare.

Cross Country Healthcare’s expected earnings growth rate for the current year is 65.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. CCRN currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CVR Energy is an independent refiner and marketer of high-value transportation fuels. CVI is also a producer of ammonia and urea ammonia nitrate fertilizers. CVI's petroleum business includes a full-coking sour crude refinery in Coffeyville, KS. Its efforts to reward its shareholders underline its strong financial position. The robust Nitrogen Fertilizer unit is supporting growth.

CVR Energy, currently carrying a Zacks Rank #3 (Hold), has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the past 60 days.

Brentwood, TN-based Delek US Holdings is an independent refiner, transporter and marketer of petroleum products. DK’s extensive downstream operations within the Permian Basin grant it a fairly significant competitive edge over its peers in the long term.

Delek US Holdings currently carries a Zacks Rank #3. The Zacks Consensus Estimate for current-quarter earnings has improved 23.1% over the past 60 days.

Boise Cascade manufactures wood products and distributes building materials. BCC currently carries a Zacks Rank of 3 and operates primarily in the United States and Canada.

Last month, management increased BCC’s quarterly dividend payout by 25% to 15 cents per share. This reflects BCC’s financial strength. Dividend-paying stocks are highly sought after, especially in the current uncertain times. The Zacks Consensus Estimate for current-quarter earnings has improved 19.4% over the past 60 days.

Builders FirstSource: Dallas, TX-based BLDR manufactures and supplies building materials. Builders FirstSource has been benefiting from its focus on cost synergies, strategic acquisition and robust demand from solid housing and repair and remodeling activities.

Builders FirstSource is currently Zacks #3 Ranked. The Zacks Consensus Estimate for current-quarter earnings has improved 34.24% over the past 60 days.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report

CVR Energy Inc. (CVI) : Free Stock Analysis Report

Delek US Holdings, Inc. (DK) : Free Stock Analysis Report

Cross Country Healthcare, Inc. (CCRN) : Free Stock Analysis Report

Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report

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