Tide Over the Coronavirus Mayhem With Relative Price Strength

The fast-spreading novel coronavirus has triggered an unprecedented sell-off in equities and bonds. Stocks are being clobbered, major indices are crashing regularly, while in a bizarre turn of events U.S. oil futures recently hit negative territory. Global efforts to combat the pandemic and policy initiatives to rev up economic activity have only had limited impact so far.  

Amid all the coronavirus-induced lockdown, panic and isolation, there are still certain stocks built to survive the crisis. One of the ways such potential plays could be identified is to look for signs of relative price strength.

The Relative Price Strength Strategy

Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential in determining whether a stock’s price performance is better than its peers or the industry average.

If a stock’s performance is lacking that of the broader groups despite impressive earnings growth or valuation multiples, then something must be wrong.

It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industries or benchmarks. This is because betting on a winner always proves to be lucrative.

Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.

Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.

Screening Parameters

Relative % Price change – 12 weeks greater than 0

Relative % Price change – 4 weeks greater than 0

Relative % Price change – 1 week greater than 0

(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)

% Change (Q1) Est. over 4 Weeks greater than 0: Positive current quarter estimate revisions over the last four weeks.

Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks – that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years – can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.

Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.

VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 (Buy) offer the best upside potential.

Here are the six stocks that made it through the screen:

Nautilus, Inc. NLS: Nautilus is a technology-driven fitness solutions provider. The 2020 Zacks Consensus Estimate for this Vancouver, WA-headquartered company represents 72.1% earnings per share growth over 2019. Nautilus has a VGM Score of A.

SpartanNash Company SPTN: A food retailer and distributor to independent grocery stores and military commissaries, SpartenNash Company has a VGM Score of A. Over 30 days, the Grand Rapids, MI-based firm has seen the Zacks Consensus Estimate for 2020 increase 13% to $1.39 per share.

The Hain Celestial Group, Inc. HAIN: The Hain Celestial Group, headquartered in Lake Success, NY, produces, distributes, markets, and sells various natural and organic foods as well as personal care products with operations in North America and Europe. The firm has a VGM Score of B and a solid earnings surprise history having surpassed estimates in three of the last four quarters, the average being 7%.

DHT Holdings, Inc. DHT: DHT Holdings is a provider of crude oil tankers. The 2020 Zacks Consensus Estimate for this Hamilton, Bermuda-headquartered company represents 270.2% earnings per share growth over 2019. DHT Holdings has a VGM Score of B.

Sportsman's Warehouse Holdings, Inc. SPWH: A specialty retailer of hunting, fishing, camping, and other outdoor merchandise, Sportsman's Warehouse Holdings has a VGM Score of B. Over 30 days, the Midvale, UT-based firm has seen the Zacks Consensus Estimate for FY 2021 increase 14.3% to 64 cents per share.

Sprouts Farmers Market, Inc. SFM: Founded in 2002 and headquartered in Phoenix, AZ, Sprouts Farmers Market has a unique model that features fresh produce at the center of the store, an expansive bulk foods section, and a vitamin department focused on overall wellness. The company has a VGM Score of B and a good earnings surprise history having surpassed estimates thrice in the last four quarters. Earnings surprise was 28.7%, on average.

Sign 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 test 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
 
DHT Holdings, Inc. (DHT) : Free Stock Analysis Report
 
Nautilus Group, Inc. (The) (NLS) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
SpartanNash Company (SPTN) : Free Stock Analysis Report
 
Sportsman's Warehouse Holdings, Inc. (SPWH) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research