The 5 Best Relative Price Strength Stocks To Buy Right Now

The novel coronavirus outbreak triggered an unprecedented sell-off in equities and bonds. Stocks were clobbered and major indices crashed regularly, while in a bizarre turn of events, the 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 has 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 fresh wave of the virus. As several U.S. states experience a spike in new coronavirus infections and hospitalization, there are apprehensions about another set of containment measures — already in place in certain regions — which might force many businesses 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, a few stocks 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

Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is important to check whether its price performance exceeds its peers or the industry average.

Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.

However, those outperforming their respective industries or benchmarks should be included in your portfolio, since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures that you have a winning option on your hands.

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