The US stock market has had a remarkable 21-month rally with no signs of slowing down. Despite September being a historically weak month for Wall Street, the major indexes have remained green, indicating strong momentum. With the Fed’s recent 50 basis point rate cut – the first since March 2020 – investors are positioned to benefit from a more favorable lending environment, boosting market confidence.
In this low interest rate environment, ‘relative price strength’ has emerged as a smart investment strategy. Stocks that show resilience and outperform peers offer solid opportunities amid market uncertainties, such as weak economic data or geopolitical tensions. This approach can provide investors with a balanced path forward.
At this stage, investors would be wise to consider stocks like these IAMGOLD company (IAG – Free report), Alaska Air Group (ALK – Free report), Norwegian cruise line companies (NCLH – Free Report) and Barrick Gold Corporation (GOLD – Free Report) based on their relative price strength.
Relative price strength strategy
Indeed, earnings growth and valuation multiples are important for investors to determine whether a stock can offer significant returns. But these are also essential for determining whether a stock’s price performance is better than that of comparable stocks or the industry average.
If a stock’s performance lags behind the broader groups, despite impressive earnings growth or valuation multiples, then something must be wrong.
It is always advisable to stay away from these stocks and bet on stocks that outperform their respective sector or benchmark. This is because betting on a winner always turns out to be lucrative.
On the other hand, determining whether or not an investment has relevant upside potential is critical when considering stocks with significant relative price strength. Stocks that outperform the S&P 500 by at least one to three months and have solid fundamentals indicate room for growth and are the best ways to execute this strategy.
Finally, it is crucial to find out whether analysts are optimistic about these companies’ upcoming earnings. To do this, we’ve added positive estimate revisions for current quarter (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 looked at the stocks that outperformed the S&P 500 over the past twelve, four weeks, and one week.)
% change (Q1) estimate. greater than 0 for 4 weeks: Positive estimate revisions for the current quarter over the past four weeks.
Zacks Rank Equals 1: Only Zacks Rank #1 (Strong Buy) stocks – which have returned more than 26% annually over the past 26 years and have outperformed the S&P 500 in 23 of the past 26 years – can make it through. You can see it The complete list of today’s Zacks #1 Rank stocks can be found here.
Current price greater than or equal to $5 and 20-day average volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while high trading volume implies sufficient liquidity.
VGM score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank of #1 or 2 (Buy), offer the best upside potential.
Here are the four stocks that made it to the screen:
IAMGOLD company: The company is a gold producer with mines in Burkina Faso and Canada. IAMGOLD’s 2024 Zacks Consensus Estimate indicates growth of 433.3%. IAG, headquartered in Canada, has a VGM score of A.
The company has a market capitalization of $3.1 billion. Over the past 60 days, the Zacks Consensus Estimate for IAMGOLD’s 2024 earnings has risen 45.5%. IAG shares are up 160.4% in a year.
Alaska Air group: It provides air transport services for passengers and cargo. The 2024 Zacks Consensus Estimate for Seattle, WA-based ALK indicates 3.8% annualized earnings per share growth. Alaska Air Group has a VGM score of B.
Over the past 60 days, ALK has seen the Zacks Consensus Estimate for 2024 rise 13.8%. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other quarter, averaging 21.9%. Shares of Alaska Air Group are up 20.7% in a year.
Norwegian cruise line holdings: Based in Miami, FL, the company is a leading cruise line offering its services to destinations around the world. NCLH’s expected three-to-five year earnings growth rate currently stands at 50.6%, which compares favorably to the industry’s growth rate of 20.6%. The company has a VGM score of A.
Notably, the Zacks Consensus Estimate for Norwegian Cruise Line’s 2024 earnings has risen 12.1% over the past 60 days. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other quarter, averaging 5.7%. NCLH shares are up 24.4% in a year.
Barrick Gold Corporation: The company, based in Toronto, Canada, is one of the largest gold mining companies in the world. GOLD’s current market capitalization is $36.3 billion. The company has a VGM score of B.
Notably, the Zacks Consensus Estimate for Barrick Gold’s 2024 earnings has risen 9.5% over the past 60 days. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters, by an average of 21.2%. GOLD shares are up 44.3% in a year.
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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 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 mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies is available at: https://www.zacks.com/performance.