U.S. stock markets managed to maintain their northbound journey this year after completing a fabulous first half. Strong economic data, especially the resilient labor market, has significantly reduced the risk of a near-term recession.

Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 6.9%, 19% and 35.1%, respectively. After lagging the S&P 500 and Nasdaq Composite for most of the year, the Dow is finally making a comeback. The blue-chip index climbed for the 12th consecutive session, marking the longest winning streak since February, 2017.

During the first half, growth sectors like technology, communication services and consumer discretionary drove the Wall Street rally. However, since the beginning of the second half, value stocks and other previously lagging sectors have been rebounding.

As a result, several stocks have shown price strength. We have selected five stocks likely to gain in the near term on the back of a favorable Zacks Rank. These companies are — The Greenbrier Companies Inc. GBX, Oceaneering International Inc. OII, Aehr Test Systems AEHR, OFG Bancorp OFG and Afya Ltd. AFYA.

Here’s How We Arrived at the Picks

We have primarily targeted stocks that have freshly been on a bull run. Stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously witnessing an uptrend, there must be a solid reason or it would have probably crashed. So, looking at stocks capable of beating the benchmark that they have set for themselves seems rational.

However, recent price strength alone cannot create magic. Therefore, other relevant parameters are needed to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Average Broker Rating 1: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Just these few criteria narrowed down the search from over 7,700 stocks to 60.

Let’s discuss five out of these 60 stocks:

The Greenbrier Companies designs, manufactures, and markets railroad freight car equipment in North America, Europe, and South America. GBX operates through three segments: Manufacturing, Maintenance Services, and Leasing & Management Services.

The stock price of The Greenbrier Companies has soared 37.4% in the past four weeks. It has an expected earnings growth rate of more than 100% for the current year (ending August 2023). The Zacks Consensus Estimate for current-year earnings has improved 22.5% over the last 30 days.

Oceaneering International is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. OII provides specialized products and services for all phases of the offshore oilfield lifecycle — from exploration to decommissioning — with a focus on deep water.

The stock price of Oceaneering International has jumped 32.3% in the past four weeks. OII has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 6.7% over the last 60 days.

Aehr Test Systems develops, manufactures and sells systems that are designed to reduce the cost of testing DRAMs and other memory devices, perform reliability screening or burn-in of complex logic and memory devices, and enable IC manufacturers to perform test and burn-in of bare die.

Leveraging its expertise as a long-time leading provider of burn-in equipment, with over 2,000 systems installed worldwide, AEHR has developed and introduced two innovative product families, the MTX system and the DiePak-Registered Trademark- carrier.

The stock price of Aehr Test Systems has climbed 30.7% in the past four weeks. AEHR has an expected earnings growth rate of 76.3% for the current year (ending May 2024). The Zacks Consensus Estimate for current-year earnings has improved 4% over the last 30 days.

OFG Bancorp is a financial holding company that conducts its business activities through its subsidiaries, primarily in Puerto Rico. OFG’s products and services consist of consumer banking and lending, commercial banking, and wealth management.

The stock price of OFG Bancorp has surged 29.5% in the past four weeks. OFG has an expected earnings growth rate of 8.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 28.8% over the last seven days.

Afya operates as a medical education group in Brazil. AFYA operates through three segments: Undergrad, Continuing Education, and Digital Services. AFYA offers educational products and services, including medical schools, medical residency preparatory courses, graduate courses, and other programs to lifelong medical learners enrolled across its distribution network, as well as to third-party medical schools.

The stock price of AFYA has advanced 18.5% in the past four weeks. It has an expected earnings growth rate of 18% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 30 days.

Oceaneering International, Inc. (OII): Free Stock Analysis Report

Greenbrier Companies, Inc. (The) (GBX): Free Stock Analysis Report

OFG Bancorp (OFG): Free Stock Analysis Report

Aehr Test Systems (AEHR): Free Stock Analysis Report

Afya Limited (AFYA): Free Stock Analysis Report

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Zacks Investment Research

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