IRegardless of your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors. Luckily, Zacks Premium offers several different ways to do both.
The popular research service can help you become a smarter, more confident investor, giving you access to daily updates from the Zacks Ranking and Zacks Industry Ranking, Zacks #1 Ranking List, stock research and premium stock screens.
Zacks Premium also includes Zacks style scores.
What are Zacks style scores?
Zacks Style Scores, developed alongside the Zacks Ranking, are complementary indicators that rate stocks based on three widely followed investment methodologies; they also help investors choose stocks that have the best chance of beating the market over the next 30 days.
Based on their value, growth and momentum characteristics, each stock is assigned a rating of A, B, C, D or F. The higher the score, the better the chance that the stock will outperform; an A is better than a B, a B is better than a C, etc.
Style Scores are divided into four categories:
Value investors love finding good stocks at good prices, especially before the broader market realizes a stock’s true value. Using ratios such as P/E, PEG, Price/Sales, Price/Cash Flow and many other multiples, the Value Style Score identifies the most attractive and discounted stocks.
Growth-oriented investors, on the other hand, are more concerned with a company’s financial strength and health, as well as its future prospects. The Growth Style Score looks at things like forecasted and historical earnings, sales and cash flow to find stocks that will experience sustainable growth over time.
Aggressive investors, who live by the saying “the trend is your friend”, are more interested in taking advantage of rising or falling trends in a stock’s price or earnings prospects. Using the week-to-week price change and monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.
If you enjoy using all three types of investing, the VGM score is for you. It’s a combination of all Style Scores, and it’s an important indicator to use with Zacks Rank. The VGM score rates each stock based on its shared weighted styles, narrowing down the companies with the most attractive value, the best growth forecasts and the most promising momentum.
How Style Scores Work with Zacks Ranking
A proprietary stock rating model, Zacks Rank uses the power of earnings estimate revisions, or changes to a company’s earnings outlook, to help investors create a performing portfolio.
Investors can count on the success of Zacks Rank, with #1 stocks (Strong Buy) producing an unmatched average annual return of +25.41% since 1988, more than double the performance of the S&P 500. But the model values a large number of stocks, and there are over 200 companies with a strong buy rank, plus another 600 with a #2 (buy) rank, every day.
That totals over 800 top-rated stocks, and it can be overwhelming trying to choose the best stocks for you and your portfolio.
This is where Style Scores come in.
To maximize your returns, you want to buy stocks with the highest probability of success. This means choosing stocks with a Zacks rank #1 or #2 that also have style scores of A or B. If you find yourself looking at stocks with a #3 (hold) rank, make sure that They also have A or B scores to ensure as much upside potential as possible.
Because the scores were created to work with the Zacks Ranking, the direction of revisions to a stock’s earnings estimates should be a key factor when deciding which stocks to buy.
For example, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one that displays scores of A and B, still has a downside earnings forecast, and a much greater probability than the its share price falls. as well as.
So the more stocks you have with a rank of #1 or #2 and scores of A or B, the better.
Stock to watch: Mattel (MAT)
Mattel Inc., headquartered in El Segundo, California, is the world’s largest toy manufacturer. The company’s products are sold directly to retailers and wholesalers in most countries in Europe, Latin America and Asia as well as Australia, Canada and New Zealand through the Mattel Girls brands. & Boys, Fisher-Price Brands, American Girl Brands and Construction and Arts. & Craft Marks. Products are sold through agents as well as distributors in countries where Mattel does not have a direct presence.
MAT is a #3 (Hold) on the Zacks rank, with a VGM score of A.
Additionally, the company could be a top pick for growth investors. MAT has a growth style score of A, forecasting year-over-year earnings growth of 13.9% for the current fiscal year.
Two analysts upgraded their earnings estimate in the past 60 days for fiscal 2022. Zacks’ consensus estimate rose $0.03 to $1.48 per share. MAT shows an average earnings surprise of 87%.
With a strong Zacks ranking and top VGM growth and style scores, MAT should be on the shortlist for investors.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could jump in at any moment.
This company could rival or surpass other recent Zacks stocks that are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.