Beat the Market the Zacks Way: Shopify, Lululemon, Telos in Focus
Last Friday, two of the three widely followed indexes closed a sixth straight winning week. The tech-heavy Nasdaq Composite and the S&P 500 jumped 0.7% and 0.2%, respectively, while the Dow Jones Industrial Average remained virtually flat.
During the week, oil prices fell significantly on the OPEC+ cutting production and an apprehension of the Chinese economy slowing down. While mixed numbers coming in from the labor sector assured investors that there were enough reasons for the Fed not to consider raising rates further.
Currently, all eyes are focused on the December Fed meeting slated this week, where the officials are expected to hold the interest rates at their current level. There is a growing consensus that a rate cut might be in the cards as early as first-quarter 2024.
Regardless of market conditions, we, here at Zacks, provide investors with unbiased guidance on how to beat the market.
As usual, Zacks Research guided investors over the past three months with its time-tested methodologies. Given the prevailing market uncertainty, you may want to look at our feats to prepare better for your next action.
Here are some of our key achievements:
Ramaco and Core & Main Surge Following Zacks Rank Upgrade
Shares of Ramaco Resources, Inc. METC have gained 69.2% (versus the S&P 500’s 6.4% increase) since it was upgraded to a Zacks Rank #1 (Strong Buy) on October 9.
Another stock, Core & Main, Inc. CNM, which was upgraded to a Zacks Rank #1 on October 10, has returned 24.7% (versus the S&P 500’s 5.7% increase) since then.
Zacks Rank, our short-term rating system, has earnings estimate revisions at its core. Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
A hypothetical portfolio of Zacks Rank #1 (Strong Buy) stocks returned +12.02% this year (through September 4th) vs. +18.2% for the S&P 500 index and +7.6% for the equal-weight S&P 500 index. The portfolio of Zacks Rank #1 stocks is an equal-weight portfolio, while the S&P 500 index is a market-cap-weighted index that has been notably distorted by the strong recent performance of mega-cap stocks.
We are not trying to cherry-pick here. But since this Zacks Model portfolio, consisting of Zacks Rank #1 stocks, is an equal-weight portfolio, the equal-weight S&P 500 index is the appropriate benchmark for comparison. Looked at this way, this portfolio has outperformed the index this year.
The Zacks Model Portfolio - consisting of Zacks Rank #1 stocks – has outperformed the S&P index by more than 13 percentage points since 1988 (Through September 4th, 2023, the Zacks # 1 Rank stocks has generated an annualized return of +24.17% since 1988 vs. +10.82% for the S&P 500 index).You can see the complete list of today’s Zacks Rank #1 stocks here >>>
Check Ramaco’s historical EPS and Sales here>>>
Check Core & Main’s historical EPS and Sales here>>>
Image Source: Zacks Investment Research
Zacks Recommendation Upgrades Telos and ImmunoGen Higher
Shares of Telos Corporation TLS and ImmunoGen, Inc. IMGN have advanced 96.5% (versus the S&P 500’s 4.7% rise) and 96% (versus the S&P 500’s 5.7% rise) since their Zacks Recommendation was upgraded to Outperform on October 12 and October 10, respectively.
While the Zacks Rank is our short-term rating system that is most effective over the one- to three-month holding horizon, the Zacks Recommendation aims to predict performance over the next 6 to 12 months. However, just like the Zacks Rank, the foundation for the Zacks Recommendation is trends in earnings estimate revisions.
The Zacks Recommendation classifies stocks into three groups — Outperform, Neutral and Underperform. While these recommendations are determined quantitatively, our analysts have the flexibility to override them for the 1100+ stocks they closely follow based on their better judgment of factors such as valuation, industry conditions and management effectiveness than the quantitative model.
To access our research reports with Zacks Recommendations for the 1100+ stocks we cover, click here>>>
Zacks Focus List Stocks Lululemon, Boeing Shoot Up
Shares of Lululemon Athletica Inc. LULU, which belongs to the Zacks Focus List, have gained 25.6% over the past 12 weeks. The stock was added to the Focus List on December 12, 2017. Another Focus-List holding, The Boeing Company BA, which was added to the portfolio on March 23, 2020, has returned 17.6% over the past 12 weeks. The S&P 500 has advanced 3.8% over this period.
The 50-stock Zacks Focus List model portfolio returned +22.3% in 2023 (through July 31st) vs. +20.6% for the S&P 500 index and +10.5% for the equal-weight S&P 500 index. In 2022, the portfolio produced -15.2% vs. the S&P 500 index’s -17.96%.
Since 2004, the Focus List portfolio has produced an annualized return of +11.27% through July 31st, 2023. This compares to a +9.65% annualized return for the S&P 500 index in the same time period.
On a rolling one-, three- and five-year bases, the Zacks Focus List returned +21.76%, +16.33%, and +12.54% vs. +12.99%, +13.71% and +12.19% for the S&P 500 index, respectively.
Unlock all of our powerful research, tools and analysis, including the Focus List, Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more, as part of Zacks Premium. Gain full access now >>
Zacks ECAP Stocks Cencora and Costco Make Significant Gains
Cencora, Inc. COR, a component of our Earnings Certain Admiral Portfolio (ECAP), has jumped 13.2% over the past 12 weeks. Costco Wholesale Corporation COST has followed Cencora with 9.8% returns.
ECAP, which consists of 30 concentrated, ultra-defensive, long-term Buy-and-Hold stocks, has returned +6.67% in 2023 (through June 30) versus +16.90% for the S&P 500 Index. The portfolio returned -4.7% in 2022 versus the S&P 500 Index’s -17.96%.
With little to no turnover and annual rebalance periodicity, the ECAP seeks to minimize capital loss by holding shares of companies whose earnings streams exhibit a proven 20+ year track record of surviving recessionary periods with minimal impact on aggregate earnings growth relative to the overall S&P 500.
The ECAP and many other model portfolios are available as part of Zacks Advisor Tools, a cloud-based solution to access Zacks award-winning stock, mutual fund and ETF research. Click here to schedule a demo.
Zacks ECDP Stocks UnitedHealth and Quest Diagnostics Outperform Peers
UnitedHealth Group Incorporated UNH, which is part of our Earnings Certain Dividend Portfolio (ECDP), has returned 13% over the past 12 weeks. Another ECDP stock, Quest Diagnostics Incorporated DGX, has climbed 7.7% over the same time frame. Of course, the inclination of investors toward quality dividend stocks to secure an income stream amid heightened market volatility contributed to this performance.
Check UnitedHealth’s dividend history here>>>
Check Quest Diagnostics’ dividend history here>>>
With an extremely low Beta and a history of minimum earnings variability over the last 20+ years, this 25-stock portfolio helps significantly mitigate risk.
ECDP has returned +0.18% in 2023 (through June 30) versus +16.90% for the S&P 500 Index. The portfolio returned -2.3% in 2022 versus -17.96% for the S&P 500 Index and -8.34% for the ProShares S&P 500 Dividend Aristocrats ETF NOBL.
Click here to access this portfolio on Zacks Advisor Tools.
Zacks Top 10 Stocks — Shopify Delivers Solid Returns
Shopify Inc. SHOP, from the Zacks Top 10 Stocks for 2023, has surged 108.9% year to date, which compares to a 21.6% gain for the S&P 500 Index.
The portfolio returned +16.16% through the end of July 2023 vs. +20.64% for the S&P 500 index and +10.73% for the equal-weighted version of the index. The portfolio returned -15.8% in 2022 vs. -18.1% for the S&P 500 index. Since 2012, the Top 10 portfolio has generated an annualized return of +22.78% vs. +13.65% for the S&P 500 index.
Since the start of 2012 through July 31, 2023, the Zacks Top 10 Stocks have produced a cumulative return of +977.47% vs. +340.35% cumulative return for the S&P 500 index.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Boeing Company (BA) : Free Stock Analysis Report
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
ImmunoGen, Inc. (IMGN) : Free Stock Analysis Report
Cencora, Inc. (COR) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report
ProShares S&P 500 Dividend Aristocrats ETF (NOBL): ETF Research Reports
Ramaco Resources, Inc. (METC) : Free Stock Analysis Report
Telos Corporation (TLS) : Free Stock Analysis Report
Core & Main, Inc. (CNM) : Free Stock Analysis Report
