The U.S. stock market has seen a remarkable rally since 2023, fueled by strong economic growth and cooling inflation. However, as we move toward 2025, uncertainty looms. Following the Federal Reserve's recent rate cut, Chairman Jerome Powell signaled a more cautious approach, hinting at fewer rate cuts next year than previously anticipated. The S&P 500 reacted sharply, tumbling 3%, marking its worst single-day performance since August.
As volatility continues, investors are seeking strategies to navigate this shifting landscape. One promising approach is focusing on relative price strength stocks with a favorable Zacks Rank. These stocks, which outperform their peers, offer resilience in turbulent markets. With 2025 likely to be a mixed bag, this strategy could provide a stable path for navigating uncertainties while capitalizing on opportunities.
At this stage, investors would be wise to consider stocks like Qifu Technology QFIN, Brinker International EAT, Urban Outfitters URBN and Abercrombie & Fitch Co. ANF based on their relative price strength.
Relative Price Strength Strategy
Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, 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 of providing 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 for 1 to 3 months, at least, and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 four of the seven stocks that made it through the screen:
Qifu Technology: Based in China, the company operates a digital finance platform offering loans and capital funding solutions. QFIN’s current market capitalization is $6.1 billion. The company has a VGM Score of A.
Over the past 60 days, the Zacks Consensus Estimate for Qifu Technology’s 2024 earnings has moved up 12.4%. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met in the other, with the average being 12.4%. QFIN shares have gained 170.8% in a year.
Brinker International: Based in Dallas, TX, the company owns, operates and franchises over 1,600 restaurants globally under the Chili's Grill & Bar and Maggiano's Little Italy brands, with a growing international presence. EAT’s expected EPS growth rate for three to five years is currently 16.4%, which compares favorably with the industry's growth rate of 14.4%. The company has a VGM Score of A.
Notably, the Zacks Consensus Estimate for Brinker International’s fiscal 2025 earnings per share indicates 37.6% year-over-year growth. It beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, the average being 12.1%. EAT shares have gone up 217.7% in a year.
Urban Outfitters: It is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts products. The Zacks Consensus Estimate for fiscal 2025 earnings of Urban Outfitters indicate 19.7% growth. Headquartered in Philadelphia, PA, URBN has a VGM Score of B.
The firm has a market capitalization of $4.9 billion. Urban Outfitters beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other, with the average being 22.8%. URBN shares have increased 47.2% in a year.
Abercrombie & Fitch: Based in New Albany, OH, Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids. Over the past 60 days, the Zacks Consensus Estimate for the firm’s fiscal 2025 earnings has moved up 3.4%, indicating 69% year-over-year growth. ANF has a VGM Score of A.
It has a trailing four-quarter earnings surprise of roughly 14.8% on average. ANF shares have surged 70.5% in a year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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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.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpAbercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
Qifu Technology, Inc. (QFIN) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
