Relative Strength and Positive Surprises

Relative price strength helps to highlight stocks for which the market has a growing affection. Here, we highlight stocks with strong and improving price momentum coupled with recent positive earnings surprises and upward revisions in earnings estimates.

The quarterly earnings reporting season allows investors to see whether the expectations of the majority of analysts have been correct, or if adjustments are necessary.

The stocks that made this issue’s First Cut are domestic, exchange-listed companies that have had a positive quarterly surprise since the beginning of April as well a positive surprise for their prior quarter. These companies are expected by analysts to have positive earnings for their current fiscal year. Also, no analysts have lowered their near-term quarterly or annual earnings estimates during the past month. The First Cut table lists the percentage by which actual reported earnings topped the consensus expectation. The table also shows the amount by which analysts have recently adjusted their near-term expectations.

Momentum investors look for short-term relative strength to be greater than long-term relative strength. To filter for price strength, companies were required to have a relative price strength rank of 50% or higher over the past 52-week period. The relative strength rank indicates how a company’s stock price has performed relative to all other stocks. A rank of 98% indicates that a stock has outperformed 98% of all stocks. Furthermore, the First Cut Screen looks for stocks with relative strength percentage rank for the last 13 weeks that is better or equal to their 52-week relative strength rank. The 30 stocks with greatest relative strength rank over the last 13 weeks made the First Cut.

The forward price-earnings ratios (price divided by expected earnings per share) provides a feel for the valuation levels of these stocks, while the 52-week high and low price indicates the range of price movement relative to th

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