NVIDIA and 4 Other Stocks to Buy in Top Ranked Industries
Spotting the top-performing stocks among all industries (big and small) is a difficult task. However, the Zacks Industry rank gives investors a clear view of which industries are performing better than the others. Once investors have the requisite information, they can use the Zacks Rank to pick the best stocks available within that particular industry.
NVIDIA Corporation NVDA, widely known for its video gaming chips, is a part of one of the top-ranked industries and is poised to lead the industry in the near future. The company has a Zacks Rank #1 (Strong Buy). The industry (Semiconductor) it falls under has a Zacks Industry rank of 17/265 (Top 6%).
The stock has been witnessing positive estimate revisions over the past 60 days that led the Zacks Consensus Estimate higher by 18.6% to its present level of $1.85 a share for fiscal 2017.
NVIDIA has pioneered the art and science of visual computing. With a singular focus on this field, the company offers specialized platforms for the gaming, automotive, data center and professional visualization markets. Its products, services and software deliver amazing experiences in virtual reality, artificial intelligence and autonomous cars.
Shares of the company continue to rally following the better-than-expected second-quarter fiscal 2017 results and encouraging revenue guidance for the third quarter issued on Aug 11. The stock has gained about 3% since then.
The stock has been clocking solid returns since the beginning of 2016 and has gained approximately 86.9% year to date. The robust performance is mainly attributable to the company’s phenomenal results in back-to-back quarters.
NVIDIA’s foray into the autonomous vehicles and the automotive electronics space has been driving this stock higher since mid-2015. It should be noted that in the last reported quarter, the company witnessed a 68% year-over-year surge in automotive segment revenues mainly driven by premium infotainment and digital cockpit features in mainstream cars.
Notably, during the 2016 CES event, the company unveiled a computer chip called Drive PX 2 to power self-driving cars. Drive PX 2 is considered to be as powerful as 150 MacBook Pros, and has the capacity to power 12 video camera inputs and sensor fusion. The chip, according to NVIDIA, can run about 24 trillion deep learning operations per second, thereby enabling driverless cars to determine the next move in a fraction of a second.
Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. NVIDIA currently trades at a forward P/E of 33.55x compared with the industry group average of 62.00x.
Zacks Industry Rank
A top Zacks Industry Rank signifies that more stocks within that group are likely to see upward earnings estimate revisions, implying a bullish outlook for that industry.
Historically, we have found that the top 50% of Zacks-Ranked Industries outperform the bottom 50% by a factor of more than 2 to 1. So it’s a good idea to leverage the Zacks Industry Rank to shortlist stocks.
The Zacks Industry classification divides the business world into 16 sectors comprising 60 medium or M-level industries and 260 plus or X-level industries. We rank all 260 plus X-level industries based on the earnings outlook for the constituent companies in each industry.
4 Well-Ranked Stocks to Invest In
Apart from NVIDIA, we have picked four other stocks in the top 10% of Zacks-Ranked Industries with the help of the Zacks Screener. Also, each stock carries a Zacks Rank #1 or 2 (Buy) and are in the top 35 Industries.
Now, let’s take a sneak peek into the fundamentals of the chosen four:
Thor Industries Inc. THO, carrying a Zacks Rank #1, designs, manufactures, and sells a wide range of recreational vehicles (RVs) at various manufacturing facilities located in Indiana and Ohio and sold through independent dealers in the U.S. and Canada. The industry to which it belongs has a Zacks Industry rank of 5/265 (Top 2%).
Thor has a market cap of $4.28 billion and a forward PE of 14.74. The company has an expected EPS growth of 10.8%. The stock has a Zacks Value Style Score of “B” and a VGM score of “B”.
Estimates for Thor are on the rise for fiscal 2016. Over the last 60 days, estimates jumped 2 cents from $4.77 to $4.79. Moreover, in the trailing four quarters, the company delivered an average positive earnings surprise of 18.5%. Thor has also gained about 45.1% year to date, which makes investors positive about the stock.
Taiwan Semiconductor Manufacturing Company Limited TSM manufactures semiconductors using its advanced production processes based on its own or third-party proprietary integrated circuit designs. The company offers a range of wafer-fabrication processes, including those required to manufacture complementary metal oxide semiconductor (CMOS) logic, mixed-signal, radio frequency, and embedded memory bipolar CMOS mixed-signal and other semiconductors. The company carries a Zacks Rank #2. The industry to which it belongs has a Zacks Industry rank of 5/265 (Top 2%).
Taiwan Semiconductor has a market cap of $148.84 billion and a forward PE of 15.03. The company has an expected EPS growth rate of 15%. The stock has a Zacks Value Style Score of “B”.
Estimates for Taiwan Semiconductor are rising for fiscal year 2016. Over the last 60 days, estimates were up by 2 cents from $1.89 to $1.91. Moreover, in the trailing four quarters, the company delivered an average positive earnings surprise of 3.7% and gained about 25.8% year-to-date.
Vishay Intertechnology Inc. VSH, a Zacks Rank #1 stock, is a leading international manufacturer and supplier of discrete passive electronic components and discrete active electronic components, particularly resistors, capacitors, inductors, diodes and transistors. The company offers its customers one-stop access to one of the most comprehensive electronic component lines of any manufacturer in the United States or Europe. The industry under which it falls has a Zacks Industry rank of 3/265 (Top 1%).
Vishay has a market cap of $2.08 billion and a forward PE of 15.90. The company has an expected EPS growth rate of 17.6%. The stock has a Zacks Style Score of “A” in Value and a VGM score of “A”.
Estimates for Vishay are rising for fiscal year 2016. Over the last 60 days, estimates moved north by 4 cents from 85 cents to 89 cents. Moreover, in the trailing four quarters, the company has delivered an average positive earnings surprise of 19.3% and gained about 17.8% year to date.
Finally we come to Potlatch Corporation PCH, which carries a Zacks Rank #1. The company is an integrated forest products company with substantial timber resources. It is engaged principally in growing and harvesting of timber and the manufacture and sale of wood products, printing papers and pulp and paper products. Its timberlands and all of its manufacturing facilities are located within continental United States.
Potlatch has a market cap of $1.55 billion and a forward PE of 34.09. The company has an expected EPS growth rate of 5%. The stock sports a Zacks Style Score of “B” in Momentum.
Estimates for Potlatch are rising for fiscal year 2016. Over the last 60 days, estimates were up 12% from $1.00 to $1.12. Moreover, in the trailing four quarters, the company delivered an average positive earnings surprise of 58.9%. Potlatch has gained about 25.7% year to date, which makes investors positive about the stock.
Looking Ahead
These five stocks have grabbed the spotlight with striking performances on the back of strong fundamentals and solid growth projections. The Zacks Industry Rank and the Zacks Rank itself allow investors to filter through thousands of stocks in order to find the winners. Therefore, at this point of time, investing in a stock belonging to a high performing industry will be the right course of action.
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POTLATCH CORP (PCH): Free Stock Analysis Report
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TAIWAN SEMI-ADR (TSM): Free Stock Analysis Report
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