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Finding Winners In A Tough Market

Screen of the Week: This week, Kevin Matras talks about one of the screens he’s been using in today’s tough market. See three of the stocks that popped up on his radar screen, and how you can get them all.

I’m constantly asked—especially after weeks like last week—what I’m using in my own screens. The answer is: Aside from the screens I write about in these articles and that we include in the Research Wizard program, I do like running this screen regularly—especially in times like this.

It starts off by looking for only those companies that have outperformed the market (i.e. the S&P 500) over the last four weeks. When the market goes down the way it has, even great stocks will feel the pressure; that’s just the way it is. But I’m looking for the one’s that held up the best—believing they have the most solid underpinnings to withstand the selling.

Then I’m narrowing that list down to only those companies with upward earnings estimate revisions over the last four weeks, and positive broker-rating changes over the last week. Upwards revisions to earnings estimates are a great sign for another reason: They often mean more upwards revisions are on the way. And companies receiving brokerage rating-upgrades over the last week— especially when the market is getting pounded—is another good sign.

The screen then looks for those companies trading within 10 percent of their 52-week high. (To narrow the list down during periods when it gets too big, I’ll search for only the top 10 stocks trading closest to their 52-week high.) This screen picks some great winners; it also picked some great winners in 2007.

I ran a series of tests using a 4-week rebalancing period, and the average annual-total compounded return was 37 percent.

For those more active traders, the returns were 48.2 percent rebalancing it once a week.

And for those in between (2-week rebalancing), the average annual-total compounded returns were 48.6 percent.

Here’s three stocks from this week’s list (for 1/7/08):

HUM Humana, Inc.
PPDI Pharmaceutical Product Development, Inc.

Add your own parameters to this screen and see how they work. Or start using this screen right now to find new companies. Even in tougher markets, there’s always something going up and doing great. The Research Wizard makes it easier to find them so you can get in earlier and make more money. Sign up now for your 2-week free trial to the Research Wizard and get the rest of the stocks on this list and see how you can start making better decisions today.

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.

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