U.S. stock markets suffered from volatility in May and the three major Indexes saw a mixed end. The Nasdaq had a solid month, ending 5.8% higher, driven by a rally in mega-cap tech stocks. The S&P 500 also finished last month 0.2% higher. However, the Dow suffered throughout May, ending the month 3.5% lower.
In its last FOMC meeting in May, the Fed raised the benchmark interest rate by 25 basis points to the range of 5-5.25%, marking the highest Fed Fund rate since August 2007. Fed Chairman Jerome Powell indicated that the ongoing rate hike cycle is perhaps reaching its end, although it will depend on the outcome of economic data. However, Powell has categorically denied any rate cut this year as inflation seems to be declining at a slow rate.
Market participants remained concerned about the next move that the Fed would announce after its June FOMC meeting. At present, the CME FedWatch is showing a 74.7% probability that the central bank will keep unchanged the benchmark lending rate at 5-5.25%. However, 25.3% of respondents have projected that the rate will be hiked by another 25 basis points.
Recently, several stocks have shown price strength despite rangebound trading. We have selected five stocks likely to gain in the near term on the back of a favorable Zacks Rank. These companies are — Celsius Holdings Inc. CELH, SPX Technologies Inc. SPXC, Evolution Petroleum Corp. EPM, Copa Holdings S.A. CPA and inTEST Corp. INTT.
Here’s How We Arrived at the Picks
We have primarily targeted stocks that have freshly been on a bull run. Stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously witnessing an uptrend, there must be a solid reason or it would have probably crashed. So, looking at stocks capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create magic. Therefore, other relevant parameters are needed to create a successful investment strategy.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.
Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.
Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.
Current Price greater than 5: The stocks must all be trading at a minimum of $5.
Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.
Just these few criteria narrowed down the search from over 7,700 stocks to 9.
Let’s discuss five out of these 9 stocks:
Celsius Holdings specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements. CELH markets Celsius, the calorie burner, through its wholly-owned operating subsidiary, Celsius Inc. CELH sells its products through grocery, drug, convenience, club and mass, and health and fitness channels.
The stock price of Celsius Holdings has soared 38.1% in the past four weeks. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 32.7% over the last 30 days.
SPX Technologies is a diversified supplier of highly engineered products and technologies. SPXC supplies infrastructure equipment serving the heating, ventilation and cooling (HVAC), and detection and measurement markets in the United States, China, the United Kingdom, and internationally. SPXC operates in two segments, HVAC and Detection and Measurement.
The stock price of VirTra has jumped 33.1% in the past four weeks. It has an expected earnings growth rate of 26.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.3% over the last 30 days.
Evolution Petroleum is an energy company engaged in the development, production, ownership, and exploitation of onshore oil and gas properties in the United States. EPM acquires and develops oil and gas fields and applies both conventional and specialized technology to accelerate production and develop incremental reserves, particularly in low permeability reservoirs amenable to lateral drilling technology.
The stock price of EPM has climbed 31% in the past four weeks. It has an expected earnings growth rate of 15.6% for the current year (ending June 2023). The Zacks Consensus Estimate for current-year earnings has improved 20.7% over the last 30 days.
Copa Holdings offers airline passenger and cargo services. On a daily basis, CPA currently operates scheduled flights and flies to destinations covering countries in North, Central, South America and the Caribbean from its Panama City hub. Passengers of the CPA also have access to flights serving many more destinations, courtesy of its code-share arrangements with United Airlines among other carriers.
The stock price of Copa Holdings has surged 20.1% in the past four weeks. It has an expected earnings growth rate of 75.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the last 30 days.
inTEST is an independent designer, manufacturer, and marketer of ATE interface solutions and temperature management products, which are used by semiconductor manufacturers to perform the final testing of integrated circuits and wafers. INTT’s high-performance products are designed to enable semiconductor manufacturers to improve the speed, reliability, efficiency and profitability of IC test processes.
Specific products of inTEST include positioner and docking hardware products, temperature management systems and customized interface solutions. INTT has established strong relationships with semiconductor manufacturers globally, which it supports through a network of local offices.
The stock price of InTEST has advanced 18.9% in the past four weeks. It has an expected earnings growth rate of 15.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 26.7% over the last 30 days.
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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: https://www.zacks.com/performance.
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