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Invest Like a Pro: Bet on Broker Upgrades

Selecting stocks is easy when the market is either bullish or bearish (though the latter is comparatively tougher than the former). However, the same can’t be said when the markets are as volatile as they are now. Selecting the right stocks in a volatile market is actually a tall order.

The beginning of 2016 was far from kind, with huge sell-offs in the markets across the globe. Plunging oil and commodity prices, Chinese economic slowdown, uncertainty over the timing of the next Fed rate hike and growth concerns in several developed economies weighed on the markets.

In this bewildering situation, it is wise to seek help from the pros. One way of doing it is to follow broker rating upgrades, as brokers have a deeper insight of stocks and the overall sectors. Also, stocks receiving upward estimate revisions will generally see the brokers that cover them upgrade their ratings. And, as we know, upward estimate revisions generally translate to solid price performance.

The Winning Strategy

Here, we equip you with a winning strategy that will fetch profits even in a challenging environment.

Broker Rating Upgrades (4 weeks) of 5% or more:First, we screened stocks that witnessed 5% or more broker upgrades over the last 4 weeks. This generated a list of 148 stocks.

Broker Recommendation -- Strong Buy or Buy is 75%:We further narrowed down the list by selecting stocks with 75% Strong Buy/Buy recommendations from the brokers. This significantly whittled the list to 39 stocks.

Change in Price (4 weeks) of 5% or more:Further, we selected stocks with upward price movement of 5% or more in the past 4 weeks. This will enable you to gain from price appreciation as well. We got 31 stocks, after putting this in the screening criteria.

Market Capitalization of $500 million or more:We added this criterion to avoid small cap stocks that are less liquid. This, in turn, lowered the number of stocks to 25.

10% or move Earnings Growth in 2016:Since this is projected to be a challenging year, stocks with a growth rate of 10% or more should perform well. Here, 17 stocks passed the test.

Favorable Zacks Rank:After applying all the above screening criteria, we looked for stocks that carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). In good markets or bad, stocks with a Zacks Rank #1 and #2 continue to outperform. In all, 10 stocks passed this rigorous test.

Here are the 5 from the list:

Constellation Brands Inc. (STZ)

Whirlpool Corp. (WHR)

HCA Holdings, Inc. (HCA)

HB Fuller Co. (FUL)

Western Alliance Bancorporation (WAL)

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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 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:

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WHIRLPOOL CORP (WHR): Free Stock Analysis Report
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FULLER(HB) CO (FUL): Free Stock Analysis Report
HCA HOLDINGS (HCA): Free Stock Analysis Report
CONSTELLATN BRD (STZ): Free Stock Analysis Report
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