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.

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.

Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (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 have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)

% Change (Q1) Est. over 4 Weeks greater than 0: Positive current quarter estimate revisions over the last four weeks.

Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. 

Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.

VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.

Here are five of the 24 stocks that made it through the screen:

Murphy USA Inc. (MUSA - Free Report): Murphy USA is a leading independent retailer of motor fuel and convenience merchandise. The 2020 Zacks Consensus Estimate for this El Dorado, AR-based company indicates 134.2% earnings per share growth over 2019. Murphy USA has a VGM Score of A.

Owens Corning (OC - Free Report): A world leader in building materials systems and composite solutions, Owens Corning has a VGM Score of B. Over 30 days, the Toledo, OH-based company has seen the Zacks Consensus Estimate for 2020 increase 35.7%.

Commercial Metals Company (CMC - Free Report): The Irving, TX based company manufactures, recycles and markets steel and metal products, related materials and services. The firm has a VGM Score of B and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 38.91%, on average.

Whirlpool Corporation (WHR - Free Report): Whirlpool is one of the largest manufacturers of home appliances in the world. Sporting a VGM Score of B, this Benton Harbor, MI-headquartered company’s expected EPS growth rate for three to five years currently stands at 16.6%, comparing favorably with the industry's growth rate of 12.4%.

Select Medical Holdings Corporation (SEM - Free Report): Founded in 1996 and headquartered in Mechanicsburg, PA, Select Medical owns long-term acute care and inpatient rehabilitation hospitals, as well as occupational health and physical therapy clinics. The company has a VGM Score of A and a perfect earnings surprise history, having surpassed estimates in each of the last four quarters by 212.61%, on average.