5 Stocks With Relative Price Strength To Enhance Your Returns

The novel coronavirus outbreak triggered an unprecedented sell-off in equities and bonds. Stocks were clobbered, major indices crashed regularly, while in a bizarre turn of events U.S. oil futures hit negative territory.

However, over the past few months, markets, securities, and crude have rebounded off their pandemic lows. Restrictions have been loosened and the economy reopened, with activity limping back toward normalcy. Meanwhile, certain drug candidates and treatments offer a ray of hope in the coronavirus fight.  

While the heaviest losses may be in the rearview mirror, the road to recovery remains long and uncertain amid concerns about a second wave of the virus. As several U.S. states experience a spike in new coronavirus infections and hospitalization, there are apprehensions that there could be another lockdown with many businesses forced to close again just after reopening. Moreover, efforts to combat the pandemic and policy initiatives to rev up economic activity have only had a limited impact so far.

Amid the entire coronavirus-induced mayhem, there are few stocks that held up to the crisis even as the virus knocked down businesses and industries. With the market expected to remain volatile over the near-to-medium term, one of the ways such potential plays could be identified is to look for signs of relative price strength.

The Relative Price Strength Approach

Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s important to measure the performance of such a stock relative to its industry or peers, or the appropriate benchmark.

If you see that a stock is underperforming on fundamental factors, then it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance to provide considerable returns.

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.

1 2 3
View single page >> |

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.