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Harry Domash, Online Investing | Analysts show favor to some growth stocks – Santa Cruz Sentinel

In recent columns, I’ve described contrarian stock picking strategies that involve buying stocks that stock analysts are advising selling. I’ve found that those strategies work because ‘out-of-favor’ stocks typically outperform when they report unexpected good news.

However, today, I’ll reverse course and describe a strategy for pinpointing stocks with particularly strong earnings growth prospects that analysts are recommending buying.

Here are the details.

While you could run the screen I’m going to describe on other screeners, I’ll demonstrate the process using the Finviz stock screening program because it’s free, user-friendly, and offers all of the screening filters needed to do the job.

So, on the Finviz homepage (finviz.com), select “Screener” on the toolbar near the top. Then select “All” on the Filters bar to see the available screening filters.

To start, because the US continues to enjoy the world’s strongest economy, limit your list to US-based stocks by using the “Country” filter and specifying “USA.”

As I’ve mentioned in previous columns, I’ve found that share prices track earnings per share (EPS) closer than another single factor. Specify “Over 30%” using both the “EPS Growth This Year” and “EPS Growth Next Year” filters to limit your list to the best prospects.

Use the Analyst Recommendation filter and specify “buy or better” to limit your list to stocks that analysts are advising buying.

Next, we’ll focus on stocks that “wired-in” institutional investors such as mutual funds and hedge funds not only already hold big positions in, but are still buying more. Do that by specifying “Over 90%” using the Institutional Ownership filter and specifying “Positive” for recent Institutional Transactions.

Next, specify “Positive” for Return on Equity to limit your list to profitable companies which typically outperform money losers.

Finally, since stocks usually move in trends, use the Performance filter to specify “Month Up” to limit your list to uptrending stocks.

Six growth plays

My screen turned up seven stocks when I ran it after the market closed Wednesday.

They were Cambium Networks (ticker: CMBM), Corner Growth Acquisition (COOL), Interactive Brokers (IKBR), Incyte (INCY), Kosmos Energy (KOS), Modine Manufacturing (MOD) and Target Hospitality (TH).

These are my ideas, but do your own due diligence. The more you know about your stocks, the better your results.

Harry Domash of Aptos publishes the Winning Investing and the Dividend Detective websites. Contact him at www.winninginvesting.com or Santa Cruz Sentinel, 324 Encinal St., Santa Cruz, CA 95060. To see previous Domash columns, visit santacruzsentinel.com/topic/Harry_Domash.

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