How to Find the Next Stock Winners
(1:00) - Finding The Next Industry Heading Into A Bull Market
(7:20) - Tracey’s Top Stock Picks: Where Should You Be Looking Right Now?
(31:00) - Episode Roundup: V, NFLX, BAC, XOM, CVX, VRT, DFIN
Podcast@Zacks.com
Welcome to Episode #348 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
With the growth stock rebound seemingly stalling, suddenly, valuations do matter. The day of reckoning seems to have come for those companies trading at 50, or 60 times, forward earnings. Many have pulled back from 2021 highs.
But should investors be diving into what worked in the past, like FAANG, when trying to find the next winners, or should they look at what might work in the future?
Screening for Future Winners
There are no set screens you can run, unfortunately, which will tell you which companies will be the next decade’s big winner. I wish it was that easy to find the “next” Apple.
But investors can use screening tools, like screening for top Zacks Rank Strong Buy stocks, to help weed through the lists of stocks and get some names to start your search.
Investors are going to have to do a lot of research and drilling down into the company’s details, however. And not every stock investment will turn out as well as expected. There are no guarantees.
Past, and Future, Stock Winners
1. Visa Inc. (V)
Visa has been a big winner since it went public in 2008. Warren Buffett even owns it in the Berkshire Hathaway portfolio. If you had bought it’s 2008 IPO, you would have seen gains of 1,372%.
However, shares of Visa have stalled in the last 2 years, gaining just 12.6% during that period. But in 2021, when it hit new highs, Visa was trading with the sky-high P/E of 45 and in 2023, it is trading at just 24x.
Has the valuation finally caught up with Visa?
2. Netflix, Inc. (NFLX)
Netflix was THE stock to own over the last 20 years. Since it’s 2002 IPO, it’s up 35,561%. But over the last 2 years, Netflix has given up some of its momentum, falling 34.9%.
Netflix isn’t cheap, trading with a forward P/E of 34.
Is Netflix’s amazing run finally over?
3. Bank of America Corp. (BAC)
Bank of America is one of the largest holdings in Berkshire Hathaway’s equity portfolio and is one of the largest banks in the United States. But shares have struggled. Bank of America is down 41% over the last 2 years and is down 1.0% over the last 5 years.
It’s dirt cheap now, trading at 7.4x. Bank of America also has a price-to-book ratio of just 0.8. A P/B ratio under 1.0 for a bank is very cheap.
Bank of America pays a dividend, yielding 3.6%.
Are you daring enough to put Bank of America on your watch list?
4. Vertiv Holdings Co. (VRT)
Vertiv is a global provider of critical digital infrastructure. Vertiv has been one of the hottest stocks on Wall Street this year with shares up 192% year-to-date.
But earnings are also expected to soar 224% this year and another 27.9% next year as it posted a record high backlog of $5 billion at the end of the third quarter 2023. Vertiv remains attractively valued, with a forward P/E of 23.
Could Vertiv be the “next” Apple?
5. Donnelley Financial Solutions, Inc. (DFIN)
Donnelley Financial Solutions is a small cap company with a market cap of $1.6 billion. It offers global risk and compliance. In the third quarter 2023, Donnelley Financial saw record software solutions sales up 5.3% year-over-year.
Shares of Donnelley Financial are up 43.4% year-to-date and have gained 243% over the last 5 years. Apple, by comparison, has gained 233% during that same 5-year time. Donnelley Financial is trading with a forward P/E of just 18.2.
Should Donnelley Financial be on your watch list?
What Else Do You Need to Know About Finding the Next Winning Stocks?
Tune into this week’s podcast to find out.
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
Bank of America Corporation (BAC) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
Donnelley Financial Solutions (DFIN) : Free Stock Analysis Report
Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
