Wall Street closed on a negative note in August. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — were down 2.4%, 1.8% and 2.2%, respectively. The Dow posted its worst month since May, the S&P 500 saw the worst monthly performance since February and the Nasdaq Composite recorded its worst month since November 2022. The five-month winning streak came to an end for the S&P 500 and the Nasdaq Composite.

Last month, U.S. stock markets faced major setbacks for the first time in 2023. Market participants remain worried about how markets will behave this month. September is historically the worst-performing month on Wall Street. In the absence of earnings results, the Fed’s September FOMC meeting will be the key focal point this month.

U.S. stock markets have witnessed volatile trading in the first week of this month. Despite volatility, a handful of 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 — Lifeway Foods Inc. LWAY, Consolidated Water Co. Ltd. CWCO, Limbach Holdings Inc. LMB, LSI Industries Inc. LYTS and Karat Packaging Inc. KRT.

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.

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 15.

Let’s discuss five out of these 15 stocks:

Lifeway Foods produces and markets probiotic-based products in the United States and internationally. LWAY’s primary product is drinkable kefir, a cultured dairy product in various organic and non-organic sizes, flavors, and types. LWAY also offers European-style soft cheeses; cream and other products, ProBugs, a line of kefir products designed for children, drinkable yogurt; and freshly made butter and sour cream.

LWAY sells its products under the Lifeway, Glen Oaks Farms, and Fresh Made brand names, as well as under private labels on behalf of customers primarily through direct sales force, brokers, and distributors.

The stock price of Lifeway Foods has soared 65.4% in the past four weeks. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 76.5% over the past 30 days.

Consolidated Water currently utilizes the most advanced technology to convert seawater to potable water and meet customer needs. CWCO is expanding operations via acquisitions and organic projects. The acquisition of full ownership of PERC and the return of tourism to the Cayman Islands are expected to drive earnings. CWCO has enough liquidity to address its short-term debt obligations.
The stock price of Consolidated Water has jumped 40% in the past four weeks.

It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 45.9% over the past 30 days.

Limbach Holdings operates as an integrated building systems solutions company in the United States. LMB operates in two segments, General Contractor Relationships and Owner Direct Relationships. LMB engages in the design, prefabrication, installation, management, and maintenance of mechanical, electrical, plumbing, and control systems, as well as heating, ventilation and air-conditioning systems.

The stock price of Limbach Holdings has climbed 28.8% in the past four weeks. It has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 21.4% over the last 30 days.

LSI Industries is an Image solutions company. It combines integrated design, manufacturing, & technology to supply its own high-quality lighting fixtures and graphics elements for applications in the retail, specialty niche, and commercial markets. LYTS has two segments, Lighting and Display Solutions. LYTS operates in the United States, Canada, Mexico, Australia, and Latin America.

The stock price of LSI Industries has surged 28.7% in the past four weeks. It has an expected earnings growth rate of 27.3% for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings improved 19.1% over the last 30 days.

Karat Packaging is a specialty distributor and manufacturer of disposable foodservice products and related items. KRT’s products include food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves and other products. KRT also offers customized solutions, including new product development and design, printing, and logistics services.

The stock price of Karat Packaging has advanced 25.8% in the past four weeks. It has an expected earnings growth rate of 40.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 28% over the last 30 days.
Lifeway Foods, Inc. (LWAY): Free Stock Analysis Report

Consolidated Water Co. Ltd. (CWCO): Free Stock Analysis Report

LSI Industries Inc. (LYTS): Free Stock Analysis Report

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

Karat Packaging Inc. (KRT): Free Stock Analysis Report

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