Despite recent market turbulence fueled by weak economic data and concerns over a potential recession, U.S. markets have maintained their upward trajectory in 2024, extending the impressive rally seen in 2023. 

Year to date, the S&P 500 has advanced more than 16%, driven by optimism as the annual inflation rate dropped to its lowest level since early 2021. This decline in inflation is encouraging news ahead of anticipated rate cuts, with market participants confident about a 25-basis point cut this month following Federal Reserve Chairman Jerome Powell's recent comments signaling cuts on the horizon. The Fed’s dovish stance reflects steady declines in inflation, putting it on track to meet the 2% target. Any rate cut size bodes well for the broader economy, creating a favorable environment for stocks. 

At this stage, investors would be wise to consider stocks like Limbach Holdings LMB, Ubiquiti UI, Royal Caribbean Cruises RCL, DaVita DVA and Boot Barn Holdings BOOT 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 five of the 10 stocks that made it through the screen:

Limbach Holdings: Based in Warrendale, PA, the company specializes in providing mechanical, plumbing and electrical services crucial for the upkeep of mission-critical systems. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has improved 8%. LMB has a VGM Score of B.

Notably, the Zacks Consensus Estimate for Limbach Holdings’ 2024 earnings per share indicates 38.1% year-over-year growth. The firm has a market capitalization of $772.8 million. LMB shares have surged 115.7% in a year.

Ubiquiti Inc.: The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. The Zacks Consensus Estimate for fiscal 2025 earnings of Ubiquiti indicates 22.2% growth. Headquartered in New Tork, UI has a VGM Score of B.

The firm has a market capitalization of $12 billion. Over the past 60 days, the Zacks Consensus Estimate for Ubiquiti’s fiscal 2025 earnings has moved up 11%. UI shares have gained 25.2% in a year.

Royal Caribbean Cruises: It is a cruise company whose brands primarily serve the contemporary, premium and deluxe segments. The 2024 Zacks Consensus Estimate for Miami, FL-based RCL indicates 71.1% year-over-year earnings per share growth. Royal Caribbean Group has a VGM Score of B.

Over the past 60 days, RCL saw the Zacks Consensus Estimate for 2024 move up 4.2%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters, the average being 18.5%. Royal Caribbean Cruises shares have moved up 66% in a year.

DaVita Inc.: Based in Denver, CO, the company is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure. DVA’s expected EPS growth rate for three to five years is currently 17.5%, which compares favorably with the industry's growth rate of 12.4%. The company has a VGM Score of B.

Notably, over the past 60 days, the Zacks Consensus Estimate for DaVita’s 2024 earnings has moved up 3.8%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters, the average being 24.2%. DVA shares have gone up 60.2% in a year.

Boot Barn Holdings: Based in Irvine, CA, the company is a retailer of men’s and women’s footwear, apparel, and accessories. BOOT’s current market capitalization is $4.5 billion. The company has a VGM Score of A.

Notably, over the past 60 days, the Zacks Consensus Estimate for Boot Barn Holdings’ fiscal 2025 earnings has moved up 11.2%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters, the average being 7.1%. BOOT shares have jumped 69.5% 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.

Click here to sign up for a free trial to the Research Wizard 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. 

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report

DaVita Inc. (DVA) : Free Stock Analysis Report

Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

Limbach Holdings, Inc. (LMB) : Free Stock Analysis Report

Ubiquiti Inc. (UI) : Free Stock Analysis Report

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