Top 10 Stocks To Buy Right Now
We hear it all the time: Trades get overcrowded. And when the tide turns the pain can get extreme. But how can investors recognize if they’re in an overcrowded stock?
Rouf Bhat/Agence France-Presse/Getty Images Alliance Bernstein’s Vadim Zlotnikov offers his suggestion.
We find extreme values of long-term price momentum percentage of sell-side analyst buy ratings, and aggressive earnings expectations with implied achievability each have risk properties and intuitive economic interpretations consistent with crowding. These three factors combine to form a composite signal that delivers a more robust measure.
Zlotnikov defines momentum as “strong performance during the trailing two years,” while aggressive expectations with implied achievability is defined as “aggressive increases in short- and long-term earnings estimates versus two years ago, combined with expensive valuation on forward earnings.”
Another important component of overcrowding is that current volatility tends to be low, and underestimates the amount of risk in the stock, Zlotnikov says. He offers a list of low-beta stocks that screened for overcrowding characteristics. They include Walt Disney (DIS), Ecolab (ECL), Walgreen (WAG), McKesson (MCK) and Madison Square Garden (MSG), among others.
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