At Zacks, we provide our members with many different opportunities to take full advantage of the stock market, as well as how to invest in a way that leads to long-term success.
One of our most popular services, Zacks Premium offers daily Zacks Ranking and Zacks Industry Ranking updates; full access to the Zacks #1 ranking list; Equity Research Reports; and premium action screens like the ESP filter on gains. All are useful tools for finding out what stocks to buy, what to sell, and what are the hottest industries today.
It also includes the Focus List, a long-term portfolio of the best stocks that have all the elements to beat the market.
Breaking down Zacks focus list
Building an investment portfolio from scratch can be difficult, so if you could, wouldn’t you take a look at a curated list of the best stocks?
This is what the Zacks Focus List, a portfolio of 50 stocks, offers investors. Not only does it serve as a starting point for long-term investors, but all stocks included in the list are poised to outperform the market over the next 12 months.
What makes the Focus list even more useful is that each pick comes with a comprehensive Zacks analyst report, which explains the reasoning behind each stock’s pick and why we think it is. a good long-term choice.
The portfolio’s past performance only reinforces why investors should take it as a starting point. For 2020, the Focus List gained 13.85% on an annualized basis compared to the S&P 500 return of 9.38%. Cumulatively, the portfolio returned 2,519.23% while the S&P returned 854.95%. Returns are for the period from February 1, 1996 to March 31, 2021.
Focus List Methodology
When stocks are selected for the Focus list, it reflects our enduring reliance on the power of earnings estimate revisions.
Earnings estimates, or growth and profitability expectations, come from brokerage analysts who track publicly traded companies; these analysts work with company management to analyze all aspects that could affect future earnings, such as interest rates, the economy, and sector and industry optimism.
What a company will earn down the road also needs to be considered, and that’s why earnings estimate revisions are so important.
Stocks that receive upward revisions to earnings estimates are more likely to receive even more upward changes in the future. For example, if an analyst increased their estimates last month, they are more likely to do so again this month, and other analysts are likely to do the same.
Using the power of revenue estimate revisions is where the Zacks rank joins the party. A unique and proprietary stock rating model, Zacks Rank uses changes to quarterly earnings forecasts to help investors create a winning portfolio.
Four main factors make up the Zacks rank: Accord, Magnitude, Upside Down, and Surprise. Each is given a raw score which is recalculated each night and compiled into the leaderboard, and with this data the stocks are then ranked into five groups, ranging from “Strong Buy” to “Strong Sell”.
The Focus list is made up of stocks hand-picked from a long list of companies ranked #1 (Strong Buy) or #2 (Buy), meaning each new addition benefits from a bullish consensus on earnings among analysts.
It can be very profitable to buy stocks with rising earnings estimates as stock prices react to revisions. By adding stocks from the targeted list, there is a high chance that you will enter companies whose future earnings estimates will be increased, which can lead to price momentum.
Discussion List Spotlight: Lam Research (LRCX – Free report)
Founded in 1980 and based in Fremont, California, Lam Research Corporation provides wafer fabrication equipment and services to the semiconductor industry.
On December 5, 2016, LRCX was added to the Focus listing at $100.49 per share. Shares are up 345.05% to $447.23 since then, and the company is No. 3 (Hold) on the Zacks ranking.
For fiscal 2022, three analysts have revised their earnings estimate higher in the past 60 days, and Zacks’ consensus estimate rose $0.03 to $31.62. LRCX shows an average earnings surprise of 2.5%.
LRCX earnings are also expected to grow by 16.1% for the current fiscal year.
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