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The Zacks Analyst Blog Highlights ArcBest, APA, ConocoPhillips, Imperial Oil and Marathon Oil Corp

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·13 min read
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For Immediate Release

Chicago, IL – February 23, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: ArcBest Corp. ARCB, APA Corp. APA, ConocoPhillips COP, Imperial Oil Ltd. IMO and Marathon Oil Corp. MRO.

Here are highlights from Tuesday’s Analyst Blog:

Should You Still Buy Stocks?

At any point in time, the decision to buy or sell securities is an extremely individual/personal one.

First because we have different goals and different time horizons. Somebody setting up home obviously has different priorities than somebody in retirement. And everybody in between also has different goals. You may also sell if you simply need the money.

And second because we all have different entry points. If I’ve bought a stock at $20, I may be happy to let it go at $30. But if somebody bought it for $27 or $28, obviously there is a different play there. So we can’t homogenize our individual goals and circumstances any more than we can our decision-making.

What we can do is stick to basic principles of investing, such as buy when stocks are cheap and sell when they are dearer. And hold a portfolio of at least six to eight high-potential stocks for the long term. And diversify our portfolio with high-growth smaller cap names that will generate some quick returns. And see that a few of our choices also pay a dividend.

This can be difficult to do in practice, especially for inexperienced investors. And this is why some investors may be more comfortable with exchange traded funds or mutual funds because they provide a certain amount of diversification and have experienced portfolio managers that may help reduce risk. Over time, many of these funds increase in value and do better than the market.

But if you’re one of those that has a limited amount of money that you can invest and a limited amount of time to build your nest egg, it may be hard to reach your goal with such a safe strategy. So you may want to invest in stocks.

It’s worth mentioning at the outset that higher gains come at higher risk. So you have to do your homework and then take a call. Sometimes, this will get you profits and sometimes losses. This is true no matter how experienced the investor. It is part of the game. But as your knowledge increases, you will take better decisions and be able to minimize the losses and gain overall.

Let’s say you’re looking to invest in the market today. After all, there’s been quite a correction this year. And it has hit pretty much all of the market. All the major indexes are down since the start of the year, including the tech-heavy Nasdaq, the larger-cap S&P 500, the smaller cap Russell 2000 and the Dow.

However, we have a strong economy that is growing faster than it has in years. And it is evident in the high GDP -

While real GDP growth in 2021 was 5.7%, this was achieved because of a nice bounce in the fourth quarter. And fourth quarter GDP was helped by replenishment of inventories, primarily by motor vehicle dealers. This is good news considering that vehicle prices have been going through the roof, making it one of the main contributors to the high inflation rate.

Personal consumption also increased, driven by healthcare, recreation and transportation. People usually increase spending on discretionary items when they have the money and when they have strong expectations of the future. Even better was the fact that personal income increases came from higher wages and other income instead of government aid.

It is also apparent from the tight labor market-

As January payroll additions continue in leisure and hospitality, professional and business services, retail trade, and transportation and warehousing, the unemployment rate, at 4.0% is down 2.4 percentage points on the year. While still above pre-pandemic levels in Feb 2020, it’s worth noting that average hourly earnings are up 5.7% from Jan 2021.

The latest job openings data shows the biggest increases in accommodation and food services, information and nondurable goods manufacturing and state and local government education.

Overall, there are many more openings than there are unemployed.

And also, in the retail sales data

January retail and food service sales increased 3.8%, up 13% on the year. Retail sales in the trailing three months increased over 16%.

Increased immunity is no doubt a factor contributing to the strengthening economy. While infection rates continue to fall, the death rate in this wave has been significantly lower. So there is more confidence in the employer to hire and in the consumer to go out and live the reopening.

Interest rates deserve due respect

Continually rising inflation rates are behind the Fed’s decision to raise interest rates. And higher interest rates usually take money out of the stock market, which leads to continued weakness. But judging by historical standards, the market is pretty low now. So the news is likely to be priced in.

Oil prices are a wild card

Oil prices are all over the place, soaring on the chances of a disruption in Russia and then falling back on the hopes of a truce. This can affect the consumer because oil prices affect not just the gas for your car but every item that you purchase in the form of higher input and transportation cost. To the extent that companies are unable to transfer the higher cost to the consumer, their profitability also takes a hit.

So if you want to make the most of the correction, you must keep all of the above in mind. Because when the correction is significant, you could buy most anything. But you will stand to gain the most if you pick stocks with strong long-term potential.

Identifying Long-term Winners

Using Zacks proven methodology, choosing long-term winners becomes easy.

First tip-choose companies operating in attractive industries. Factors affecting the industry naturally affect the individual companies. So at any given time, these factors account for 50% of a stock’s price movement. Attractive industries are those that are dealing with the current situation better than others or are otherwise in an advantageous position relative to other industries that are also subject to broader market conditions. Therefore, choosing stocks in winning industries improves your chances of success. And our research has shown that the top 50% of Zacks-classified industries outperform the bottom 50% 2 to 1.

Second, since we want long-term winners, it’s probably a good idea to look for companies with attractive long-term growth estimates. When your money is at stake, you should probably trust the experts. When analysts assign an attractive long-term growth rate, there has to be a good reason for it.

Third, although we are looking for long-term growth, it absolutely doesn’t hurt to select companies that are also expected to do well in the current situation. In fact, it can be disconcerting to have to wait for all your stocks to come out of the doldrums. And there’s also the risk that some may not. So an attractive growth rate estimate for the current year may also be a good idea.

Fourth, since we are relying on the experts, we may as well choose stocks on which analysts are bullish. These would be stocks that have an upward estimate revisions trend. Analysts raising estimates on a stock is generally a sign that the company will do well in the future. If the estimate is for a quarter, it is likely to do well that quarter. If it is for the year, it is likely to do well that year.

What’s more, rising estimates will also be captured in the Zacks Rank for stocks. When a stock has a Zacks Rank of #1 (Strong Buy) or #2 (Buy), chances are its estimates are rising, which will also be positive for prices. If you add a Value-Growth-Momentum (VGM) score of at least B, the chances of outperformance further increase. Moreover, a high VGM score indicates that the stock is attractive for any kind of investment strategy.

And finally, no matter how beaten down, it is necessary to check the valuation.

Based on the above criteria, here are 5 stocks worth snapping up today. With the exception of ArcBest, which operates in the transportation sector, they all belong to the energy sector.

ArcBest Corp.

ArcBest provides freight transportation and integrated logistics services. It operates in the Transportation – Truck industry (top 7% of Zacks ranked industries).

Analysts expect ArcBest to generate long-term growth of 37.8%. They expect 22.4% growth this year. What’s more, they have been raising their estimates on the stock and the estimates for 2022 have risen 14.1% in the last 30 days.

No wonder the shares carry a Zacks Rank #1, Value Score A, Growth Score A and VGM Score A.

ArcBest shares have also lost some value this year and are currently trading at around 50% of their annual range. So the price to forward 12 months’ earnings ratio has dropped to 8.44X, way below the average for the industry as well as the S&P 500.

So there’s no reason not to jump in.

APA Corp.

APA is engaged in the exploration of oil and gas properties and their production. Its operations are in the United States, Egypt and the United Kingdom, as well some exploration activities offshore Suriname. It belongs to the Oil and Gas - Exploration and Production - United States industry (top 23%).

APA’s long-term growth estimate is 20.4% and analysts expect the company to grow a much faster 64.3% this year. Its 2022 estimate has increased 20.4% in the last 30 days.

APA shares carry a Zacks Rank #1, Value Score B, Growth Score A and VGM Score A.

APA shares trade at just 4.87X earnings although they have been rallying since December. Since they are really cheap despite the strong growth outlook, they are worth adding to your portfolio.

ConocoPhillips

Engaged in the exploration, production, transportation and marketing of crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide, ConocoPhillips belongs to the Oil and Gas - Integrated - United States industry (top 14%).

Analysts expect ConocoPhillips to grow 15.3% in the long term and 62.1% this year. They have raised its 2022 estimate 14.6% in the last 30 days.

ConocoPhillips shares carry a Zacks Rank #1, Value Score C, Growth Score A and VGM Score A.

At 9.38X forward earnings, the shares are cheap both with respect to their own performance over the past year and the S&P 500. But they are trading at 91.5% of their annual range, indicating that the shares have languished over the past year.

Imperial Oil Ltd.

Imperial Oil explores for, produces, and sells crude oil and natural gas in Canada. It operates through three segments: Upstream, Downstream and Chemical. It belongs to the Oil and Gas - Integrated – Canadian industry (top 3%).

Imperial Oil is set to grow 27.9% in the long term. But this year will also be a stellar one, with the company growing 74.6%. Analysts raised their 2022 estimates by 13.3%.

Imperial Oil shares carry a Zacks Rank #2 (Buy), a Value Score of B, a Growth Sore of A and VGM Score A.

The shares trade at 9.26X forward earnings, which is very cheap compared to the S&P 500 and relative to their own performance over the past year. The shares are on a tear and analyst estimate revisions seem to indicate that this momentum will take time to cool.

Marathon Oil Corp.

Marathon Oil engages in the exploration, production and marketing of crude oil and condensate, NGLs and natural gas; and the production and marketing of natural gas products like LNG and methanol. It belongs to the Oil and Gas - Integrated - United States (top 14%).

Analysts estimate Marathon Oil’s long-term growth to be 14.4% and current year growth to be 75.9%. hey have taken their current-year estimates up 26.0% in the last 30 days.

As a result, Marathon Oil shares carry a Zacks Rank #1 at the moment, with Value and Growth scores of B and a VGM score of A.

The shares trade at 8.15X forward earnings, which is very cheap by historical standards and the S&P 500.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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ConocoPhillips (COP) : Free Stock Analysis Report
 
Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
APA Corporation (APA) : Free Stock Analysis Report
 
Imperial Oil Limited (IMO) : Free Stock Analysis Report
 
ArcBest Corporation (ARCB) : Free Stock Analysis Report
 
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